WEBVTT - Crunch CEO on Range of Emotions Over Virus

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. All right, let's get into one

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<v Speaker 1>of our favorite things to talk about. It's the world

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<v Speaker 1>of fitness. Jim Rowley is back with us. The CEO

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<v Speaker 1>of Crunch Fitness. Johnny is on the phone from San Francisco. Jim,

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<v Speaker 1>we caught up. Good lord. It was last year. It

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<v Speaker 1>seems like a hundred years ago. A lot has happened

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<v Speaker 1>since then. And first of all, I trust your well

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<v Speaker 1>doing okay out in San Francisco. I'm doing well. It's

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<v Speaker 1>nice to talk to you again. And I think it's

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<v Speaker 1>been eight or nine months. It was in July after

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<v Speaker 1>it was after TPG made that investment, wasn't it. That's right,

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<v Speaker 1>that was I think we spoke probably a week later.

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<v Speaker 1>You're right, that's exactly right. So give us an update.

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<v Speaker 1>I mean, what's going on as you look at what's

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<v Speaker 1>you know, what's happening in the world. Obviously the world

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<v Speaker 1>is shut down, but people still thinking about staying well,

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<v Speaker 1>staying fit. How does it look from where you sit? Well,

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<v Speaker 1>I'm encouraged, I'm frustrated, and I'm angry. So I'm I'm

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<v Speaker 1>feeling a lot of emotion, as I think a lot

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<v Speaker 1>of people are. Um you know, we had to close

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<v Speaker 1>over three hundred gems between our own gyms and our

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<v Speaker 1>franchise network in a matter of seventy two hours, and

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<v Speaker 1>we've gone from a significant amount of revenue to zero

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<v Speaker 1>since March sixteenth, and we've tried to be considerate of

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<v Speaker 1>our team members and our and our members along the way.

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<v Speaker 1>I was able and fortunate enough to pay our all

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<v Speaker 1>of our team members from March sixteenth through March thirty one,

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<v Speaker 1>regardless of the fact that we were closed and unfortunately

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<v Speaker 1>had to furlough nearly three thousand employees on April one.

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<v Speaker 1>I've been able to pick up their healthcare costs associated

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<v Speaker 1>with their benefits plans. So that's been a little bit

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<v Speaker 1>of a good feeling that we could do something for

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<v Speaker 1>employees while they're not working. But yeah, it's been a

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<v Speaker 1>difficult time for us. We've spent the majority of the

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<v Speaker 1>last three weeks just really working on our on how

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<v Speaker 1>we re emerge, how do we reinvent ourselves during this period,

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<v Speaker 1>and what does it look like to be the new Crunch, bigger, better,

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<v Speaker 1>stronger as we emerge. Can you do anything while you know,

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<v Speaker 1>in terms of online we you know, Jason, I've talked

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<v Speaker 1>a lot about I've been doing yoga closes online. I

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<v Speaker 1>guess it's different because you've got gyms and people want

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<v Speaker 1>to use equipment. But I do wonder how do you

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<v Speaker 1>can you take advantage of the online world in any

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<v Speaker 1>any form? Yeah, Carrol is a great question, and we

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<v Speaker 1>have And we had a program um years ago that

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<v Speaker 1>we established called Crunch Live, and the Crunch Live had

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<v Speaker 1>over a hundred workouts on it as a digital format,

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<v Speaker 1>and we were doing probably two thousand workouts a day

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<v Speaker 1>and over a hundred countries pre COVID. Since we've hit

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<v Speaker 1>nearly a hundred thirty five countries and we've reached a

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<v Speaker 1>peak of almost a hundred thousand workouts a day UM,

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<v Speaker 1>so they're able to get into the Crunch library. We've

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<v Speaker 1>also done Facebook workouts. We've put a lot of material

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<v Speaker 1>upon Instagram around the benefits of nutrition supplementation UM, and

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<v Speaker 1>we've done some workout challenges and so forth. We also

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<v Speaker 1>partnered with a group called LIPS Session and we've allowed

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<v Speaker 1>our personal trainers to continue to do their one on

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<v Speaker 1>one personal training sessions with their clients and that's been

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<v Speaker 1>really beneficial for both the trainers and the members. Yeah.

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<v Speaker 1>I mean it's interesting too to think about. And you

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<v Speaker 1>alluded to this earlier, Jim, this notion that you know,

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<v Speaker 1>you you have your you have your staff, but so

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<v Speaker 1>many people in this world, uh, you know, we're sort

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<v Speaker 1>of independent contractors that they've got a side hustle or

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<v Speaker 1>you know, they sort of make it work in this

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<v Speaker 1>fitness business that that we all know, all three of

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<v Speaker 1>us know. Uh, it's sort of pieced together in a

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<v Speaker 1>lot of ways. There's a it's very fragmented. Uh So

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<v Speaker 1>I do wonder, you know, how the business model changes

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<v Speaker 1>from here or does it effectively revert what are you

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<v Speaker 1>finding as you you know, sort of work through re emerging. Yeah,

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<v Speaker 1>so look, I think that we're all a where that

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<v Speaker 1>you know, the morbidity rates skyrocket if you've got hypertension,

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<v Speaker 1>heart disease, obesity, diabetes, diabetes, or any respiratory illness. Right,

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<v Speaker 1>So when it comes to obesity, diabetes, hypertension, and heart as,

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<v Speaker 1>we know that exercise are are great things that you

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<v Speaker 1>can do to a law with nutrition and proper diet,

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<v Speaker 1>exercise right, that you can do to kind of be

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<v Speaker 1>in better shape and and help in the event that

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<v Speaker 1>you get a virus like this. So look, when you

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<v Speaker 1>talk about encouraged, we're encouraged by the members that are

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<v Speaker 1>participating with Crunch Live. We're encouraged by the fact that

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<v Speaker 1>the feedback we've received has been tremendous. Um get open,

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<v Speaker 1>get open, We can't wait for our Crunch members are

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<v Speaker 1>putting up memes showing, like, you know, thousands of people

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<v Speaker 1>rushing the front door of Crunch when it opens, and

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<v Speaker 1>it had a little bit of fun with it. But

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<v Speaker 1>we think there's a lot of pent up demand. We

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<v Speaker 1>also think that there's a lot of baking and a

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<v Speaker 1>lot of calorie construction going on during this period. You

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<v Speaker 1>cannot buy flower. I have been trying for weeks and

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<v Speaker 1>I cannot buy flower. It's crazy flowerless baking. There's flowerless bag.

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<v Speaker 1>But we we are encouraged. Our members have sent us

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<v Speaker 1>a lot of goodwill via social media, just saying we

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<v Speaker 1>can't wait to get open, and and and and start

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<v Speaker 1>up again and and again. Yesterday with the White House

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<v Speaker 1>and the CDC um you know, releasing the Open America,

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<v Speaker 1>Opening America again. Plan to have Jim's mentioned for the

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<v Speaker 1>first time to be in the power point deck to

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<v Speaker 1>talk about the fact that Jim's can be open in

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<v Speaker 1>phase one with social distancing and sanitary requirements and so forth.

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<v Speaker 1>That was really encouraging. So we're we're excited about that,

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<v Speaker 1>and we've been partnying with some ministry veterans in China

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<v Speaker 1>and other parts of Asia to really understand like how

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<v Speaker 1>have they been emerging? What is this right? So we

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<v Speaker 1>we we've got a lot of intelligence as to what

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<v Speaker 1>to expect, and we've spent the better part of the

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<v Speaker 1>last three weeks working on kind of our readiness plan,

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<v Speaker 1>which is a thirty seven page document for both our

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<v Speaker 1>franchise network and our sinnings are detwork. That was really fun.

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<v Speaker 1>Hold that thought, Jim. We're gonna continue this conversation in

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<v Speaker 1>just a minute. Excited to be talking to Jim Rowley,

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<v Speaker 1>CEO of Crunch Fitness. All right, I want to get

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<v Speaker 1>back to Crunch the EO Jim Rowley, he's with us

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<v Speaker 1>on the phone. So, Jim, you were just before we

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<v Speaker 1>had to take a break here, we were talking about

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<v Speaker 1>the reopening and what your team has been focusing on.

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<v Speaker 1>Tell us the kind of things that the discussions you've

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<v Speaker 1>been having, you know, kind of what does life look

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<v Speaker 1>like as we say, you know, after the virus, after

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<v Speaker 1>COVID nineteen, what are the discussions you're having and how

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<v Speaker 1>do you think you're reopen. So we're looking at a

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<v Speaker 1>phased approach for understanding what the consumer demand, the member

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<v Speaker 1>demand is going to be. We've we've already got a

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<v Speaker 1>class registration system that's done through our apps, and we're

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<v Speaker 1>able to manage inventory that way. We're considering doing that

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<v Speaker 1>with reservations in terms of workout if there's a need

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<v Speaker 1>from from each of the governors and so forth. We're

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<v Speaker 1>really looking kind of calling it the crunch way, which

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<v Speaker 1>is informing members we want them to be kind, consider

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<v Speaker 1>it and be mindful, and then from there, we've got

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<v Speaker 1>conference of protocols around social distancing, social spacing, spacing, cleanliness, sanitation, disinfection.

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<v Speaker 1>We've been upgrading all of our systems for the past

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<v Speaker 1>three weeks. Uh, you know, despite the fact that we've

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<v Speaker 1>been making no money, we've been working on infrastructure changes

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<v Speaker 1>to ensure that the clubs are clean, disinfected, that all

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<v Speaker 1>of our products kill the COVID nineteen virus. Buying mass

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<v Speaker 1>buying gloves um really being comprehensive in that nature and

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<v Speaker 1>just looking at at the at the whole protocol soup

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<v Speaker 1>to nuts, so as you enter a crunch, you'll be

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<v Speaker 1>informed of what the new guidelines are as you go

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<v Speaker 1>to check in six ft spacing with with intervals on

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<v Speaker 1>the floor that say ready, set, go. But there's six

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<v Speaker 1>six ft apart right, So what are the mannerism is

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<v Speaker 1>going to be like when you're with a personal trainer

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<v Speaker 1>with the personal trainer be gloved in mass and what

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<v Speaker 1>what kind of separation will be required to still get

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<v Speaker 1>that instruction? Um. We put a grid system on our

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<v Speaker 1>on our floors of our group fitness classes to ensure

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<v Speaker 1>that there's six ft um from member to member. We've

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<v Speaker 1>shut off every other treadmill to ensure that there's six

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<v Speaker 1>ft between people that are using the treadmills or the

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<v Speaker 1>ellipticals or the bikes or what have you. So we've

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<v Speaker 1>tried to look at every single aspect of the club,

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<v Speaker 1>turn it upside now and say how can we reinvent

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<v Speaker 1>this ensure that it's clean, sanitary and uh, and it's

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<v Speaker 1>a healthy environment for our members and our team members

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<v Speaker 1>and uh. Again. We put out a thirty seven page

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<v Speaker 1>document that is relatively comprehensive and really looked at it

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<v Speaker 1>from a tactical strategic standpoint. Wow. I mean you answered

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<v Speaker 1>a lot of my questions Jim, just there in terms

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<v Speaker 1>of like what is this actually or my next question,

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<v Speaker 1>which was what does this actually look like? I do?

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<v Speaker 1>I want to ask you before we get too far

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<v Speaker 1>away from what's happening right now, about the financial support,

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<v Speaker 1>if any, that you're getting on a federal or state level.

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<v Speaker 1>Understanding the sort of complexities to some extent of your

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<v Speaker 1>business sort of being a company but also having franchisees,

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<v Speaker 1>are you able to tap into any of these sources

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<v Speaker 1>of funds that are out there? Jason, I always feel

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<v Speaker 1>like you and I are mind melding. I was hoping

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<v Speaker 1>you were going to ask this question. Unfortunately, we're we're

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<v Speaker 1>too big to qualify and too small to matter, so

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<v Speaker 1>we are not as a corporation. We haven't been able

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<v Speaker 1>to participate in anything. And when I opened, I said, look,

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<v Speaker 1>I'm encouraged, I'm hopeful, but I'm also frustrated and angry

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<v Speaker 1>because as a company we've been left out. We don't

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<v Speaker 1>qualify for the SBA loans. Many of our franchise e

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<v Speaker 1>s have have applied and so forth. Some have been

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<v Speaker 1>turned down, some are getting negative feedback and so forth.

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<v Speaker 1>And we know that the three billions already been utilized,

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<v Speaker 1>so we're anxious to see if the two fifty will

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<v Speaker 1>be part of the next stimulus. But where I'm really

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<v Speaker 1>angry is while I'm making no revenue and I'm not

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<v Speaker 1>able to qualify for the Cares Act or the p

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<v Speaker 1>p P and so forth. I've got landlords, some of

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<v Speaker 1>which are being tremendous. They've they've given us deferrals on

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<v Speaker 1>rent and they consider our circumstances. Others are being deaf here.

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<v Speaker 1>They don't want to talk about it there wait and see.

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<v Speaker 1>And then I've got about a third of our landlords

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<v Speaker 1>that are sending default notices that they're being opportunistic, trying

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<v Speaker 1>to get us into a place where they can terminate

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<v Speaker 1>our leases, and they're really being almost vengeful in nature.

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<v Speaker 1>And you know, you watch these commercials. I even listen

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<v Speaker 1>to the Bloomboog commercials, and we talked about we're all

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<v Speaker 1>in this together. It doesn't have here. The landlords are

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<v Speaker 1>and I don't think anybody's speaking about that. Um they

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<v Speaker 1>even if they gave me a deferral, they'll they'll get

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<v Speaker 1>their money at some point. Whereas I generate no revenue,

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<v Speaker 1>I have no recourse to get it back. So that's

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<v Speaker 1>where I get angry. I'm also frustrated that the business

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<v Speaker 1>interruption insurance nobody qualifies, yes from from a lot of

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<v Speaker 1>restaurants too. Yeah, do you have any sense that that

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<v Speaker 1>could change? Well, we're lobbying with We're working with Congress

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<v Speaker 1>from Brian Fitzpatrick out of Pennsylvania, and our industry UM

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<v Speaker 1>is the International Health and Racket Sports Association. We've got

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<v Speaker 1>a lobbying team together. We're trying to work UM through

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<v Speaker 1>Capitol Hill to get something and play both for understanding

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<v Speaker 1>the qualifications for s b A, but also for in

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<v Speaker 1>the future to understand that business and interruption insurance should

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<v Speaker 1>include pandemics such as this. It's impossible for me to

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<v Speaker 1>get my head wrapped around the fact that we've been

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<v Speaker 1>paying all this money for all this time and we're

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<v Speaker 1>excluded from something like this. This seems like the perfect

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<v Speaker 1>opportunity for the insurance. But he's a step up if

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<v Speaker 1>nothing else, have them administer a program the government backed. Yeah. Hey, hey, Jim,

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<v Speaker 1>just twenty seconds. You gotta be quick. What about TPG

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<v Speaker 1>they've made an investment before. Can't you get some funds

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<v Speaker 1>from them? I mean, they've got deep pockets, Carol, I

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<v Speaker 1>told you this when we met in July. They've been

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<v Speaker 1>they were incredible during the process. They've been even better

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<v Speaker 1>during UH kind of the honeymoon phase and into the

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<v Speaker 1>first year. They've been tremendous. And of course, um, they're

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<v Speaker 1>not gonna let Crunch fail there. They've they've made that

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<v Speaker 1>commendment to us. Right now, we've got enough cash to

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<v Speaker 1>get probably through July UH and hopefully you know, we'll

0:11:36.440 --> 0:11:39.560
<v Speaker 1>be way ahead of that. But our forecasts are okay.

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<v Speaker 1>But imagine imagine our partners saying we've got you. If

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<v Speaker 1>we get into dark waters, yeah, all right, we're gonna

0:11:45.400 --> 0:11:47.040
<v Speaker 1>leave it there. Can't wait to catch up with you.

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<v Speaker 1>On the other side, Jim really see of Crunch Fitness