Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. The fitness industry
Speaker 1: was not impacted equally during the pandemic. Those within person facility, storefronts,
Speaker 1: Jim's Man, they were hit pretty hard. Those who could
Speaker 1: pivot quickly, often to digital fare at a lot better. Some,
Speaker 1: including fitness equipment prior providers, think Peloton fed pretty well
Speaker 1: during the pandemic shutdown. Here with what's going on though
Speaker 1: in the world of Crunch Fitness is Ben Midgeley. He
Speaker 1: is CEO and founding partner of Crutch Fitness Franchising, and
Speaker 1: he's on the phone in New Hampshire Crunch Fitness franchise.
Speaker 1: Let me slow down, Ben, so I can get it right.
Speaker 1: Say it five times fast. Hey, how are you great?
Speaker 1: I'm doing well. Uh. You know, it's an interesting day
Speaker 1: where we're being told by the CDC we can take
Speaker 1: off our masks inside if you've been fully vaccinated. What's
Speaker 1: going on in your world and how does it compared
Speaker 1: to where we were a year ago? Well a year ago. Yeah,
Speaker 1: we shut down around March fifteen, the holy industry shutdown
Speaker 1: out and it was extremely hard on us and our franchise.
Speaker 1: These were primarily a franchise based company. Um, the owners
Speaker 1: had to really dig in and do a lot of
Speaker 1: things right to make it out the other end. But
Speaker 1: a year ago, if you look at March from March,
Speaker 1: we actually, I believe we're the only major brand that
Speaker 1: actually increased our members of the last year. We were
Speaker 1: at five points six percent, while our primary competitors were
Speaker 1: down anywhere from twelve to thirty five percent. So even
Speaker 1: surprised us a little bit. It was a fantastic outcome.
Speaker 1: And there's a lot of things they have to be
Speaker 1: right along the way, but you know, we were coming
Speaker 1: out the other end a bit stronger than we thought
Speaker 1: we would, and we're really excited about what what's going
Speaker 1: to happen that the surge is going to come. Well,
Speaker 1: I want to hear positive surge going forward. I want
Speaker 1: to hear about the future. Why do you think you're
Speaker 1: up five percent? What did you do? What are members
Speaker 1: telling you? Why are they coming back? Yeah, So, you know,
Speaker 1: we look back at that a lot, and what was
Speaker 1: interesting is if you look at our existing member base,
Speaker 1: which I think is where most of the health was lost,
Speaker 1: we only had a two percent dropped in our existing members,
Speaker 1: which was fantastic, and then when we reopened, I mean
Speaker 1: basically all of them came back very quickly. And we
Speaker 1: think due to a couple of things. One is the
Speaker 1: community field you get in the clubs. I think a
Speaker 1: lot of people are just missing that interaction due to
Speaker 1: such an elongated shutdown. Our clubs were in the low price,
Speaker 1: high value space, but we have a lot more in
Speaker 1: our clubs and most competitors do. You've got the weights,
Speaker 1: you've got group fitness, you've got the rod, you've got
Speaker 1: hit classes, personal training, you know, relax and recovery. Just
Speaker 1: a tremendous amount of things, so more reasons I think
Speaker 1: to come back to the club than some of the
Speaker 1: other clubs might offer. And then UM member trust was big.
Speaker 1: You know that the trust for our members that we
Speaker 1: were doing the right thing for them was important. We
Speaker 1: stopped feeling when we should when some other brands didn't.
Speaker 1: I'm sure you saw that in the news that that's
Speaker 1: what I wanted to just remind us what you did,
Speaker 1: because I know that there's been places that I supported
Speaker 1: just because they were small businesses and I didn't want
Speaker 1: to see them go to the downside, so I was
Speaker 1: still paying. But what did you guys do did your
Speaker 1: members to keep the membership? Uh? Intact? Did you wave
Speaker 1: monthly fees? What did you do? Well, we build every
Speaker 1: day in our business, So if you joined on the
Speaker 1: you know, the twelve, you get built on the twelve.
Speaker 1: So as the days came up, which we closed around
Speaker 1: the fifteenth and the sixteenth, we begin to stop building
Speaker 1: people immediately after that. Now there was a little bit
Speaker 1: of a rolling closure depending on the different states. It
Speaker 1: didn't all happen within two days rolled in, but then
Speaker 1: we sent out guidance to all the clubs and the franchises.
Speaker 1: You know, they're independent business owners, but they're extremely receptive
Speaker 1: and from a company standpoint, the best and the right
Speaker 1: thing to do is to stop builing members immediately and
Speaker 1: then you know, bill when you reopen. That's what we did,
Speaker 1: and some other companies took a little bit of a
Speaker 1: gamble and you know, continue to build or wait until
Speaker 1: that next half on the April one, and just figured
Speaker 1: we'll try that and that that obviously stung a lot
Speaker 1: of people, and that was the wrong thing to do,
Speaker 1: all right, So interesting, but that explains to how you
Speaker 1: were able to kind of hold onto your membership write
Speaker 1: those numbers. Yeah, And I think the other aspect of
Speaker 1: that is, you know, the clubs took cleanliness really safely
Speaker 1: and safety precautions extremely seriously, I believe, we mean as
Speaker 1: they reopened, as they reopened even yeah, exactly. And prior
Speaker 1: to that, we were I believe the first club to
Speaker 1: have our our readiness plan out and to our franchisees.
Speaker 1: We had it out to them within three weeks of
Speaker 1: the closures. So that gave him a really good tool
Speaker 1: to work on to make sure they were prepped and
Speaker 1: prepared to open. And then you know, the franchiseess did
Speaker 1: a great job with member communication, team training, and facility preparedness.
Speaker 1: So um, you know, it's it's all on their shoulders,
Speaker 1: all the credit and then of course the p PP loans,
Speaker 1: the ideal, all that sort of support that really helps
Speaker 1: him get through it too. Yeah. We talked to Jim
Speaker 1: really over a crunch, you know, and he talked you know,
Speaker 1: I think we talked him about the reopening plan and
Speaker 1: it was pretty extensive, a lot of pages, if I recall, Yeah,
Speaker 1: it was it was about forty pages, and there was
Speaker 1: a was a really big team effort with their franchisees.
Speaker 1: Jim led that process, of course, and then uh, you
Speaker 1: know it was it was important, you know, but it's
Speaker 1: one of those things that franchisees you probably look at
Speaker 1: and say, Jesus a lot of writing, But when you
Speaker 1: look back a year later, you think, hey, this was
Speaker 1: great to have. Well, you have a playbook now in place. Uh,
Speaker 1: And I do wonder are you guys planning for maybe
Speaker 1: another shutdown in the future. Were are already talking with
Speaker 1: the medical community about the importance of booster shots and
Speaker 1: people are marking their calendars about I got the two vaccines,
Speaker 1: but six months now from now, I've got to get
Speaker 1: a booster shot otherwise we could see, you know, a
Speaker 1: flare up. Are you guys planning for figuring out how
Speaker 1: to maybe deal with another shutdown anytime in the near future?
Speaker 1: And we've got about thirty seconds and I'll come back
Speaker 1: and talk. We're planning for it. I hope it doesn't happen,
Speaker 1: you know what I mean, We have it down, that's
Speaker 1: down for this type of a situation. I mean, the
Speaker 1: trick with business planning is you're continuency planning. How why
Speaker 1: do you go Uh? You know, you've got to look
Speaker 1: at natural disasters and all sorts of things. So we're
Speaker 1: trying to constantly expand our our contingency planning and emergency
Speaker 1: planning for whatever situation arises. Okay, let's get back to
Speaker 1: Ben Midgeley, chief executive officer, founding partner Crunch fitness franchise,
Speaker 1: still with us on the phone from New Hampshire, So
Speaker 1: making your way back, Um, are all the franchises coming back?
Speaker 1: Did anybody have to shut down permanently over the last year,
Speaker 1: including international? We shut down a few clubs single digits.
Speaker 1: Some of them were pre planned locations were too small
Speaker 1: or had to move them or what have you. But
Speaker 1: I'd say i'd say probably about four out of three
Speaker 1: n fifty were you know, pandemic related. And then so
Speaker 1: how are you thinking about the reopening trade and the
Speaker 1: reopening of the economy. It's something I gotta tell you, Ben,
Speaker 1: We are trying to assess day today. A lot of
Speaker 1: CEOs and leaders aren't giving a lot of visibility. Still,
Speaker 1: I think we understand we're going to have a significant
Speaker 1: bounce back around now and maybe probably into the next
Speaker 1: quarter easily as things reopen and there's a lot of
Speaker 1: stimulus money out there, but how do you see it
Speaker 1: and are you confident to make some significant investments in
Speaker 1: terms of expansion at this point? Sure for us, I
Speaker 1: think we're certainly on the more optimistic side, and you
Speaker 1: know we're not shy about that for for a few reasons,
Speaker 1: some not great, but at least for our industry. One
Speaker 1: is we've had a loss of a lot of competitors,
Speaker 1: which I say that with a heavy heart because you
Speaker 1: never want to see you know a lot of folks
Speaker 1: in the industry, which I've been in for thirty years,
Speaker 1: so I know a lot of these operators have have
Speaker 1: lost the businesses. But it's estimated that about se of
Speaker 1: the health clouds of closing the industry, which actually during
Speaker 1: your break it mentioned the joint sentence sponsorship for the
Speaker 1: gim Zac, which is fantastic, So hopefully that that will
Speaker 1: get traction and get past and be able to provide support,
Speaker 1: UH support to industry operators. But there's a significant loss
Speaker 1: of competitors, which which needs there is more market share
Speaker 1: you have to go around. UH. Real estate is softening.
Speaker 1: A lot of tents went out of business, so landlords
Speaker 1: have become much more open and accommodating to bring in
Speaker 1: thirty thousand square foot tenant that can bring you know,
Speaker 1: six seven thousand people into the center. So that's worked
Speaker 1: out really well for us. Our brands getting stronger, you know,
Speaker 1: as our footprint expands, we're getting more exposures, so more
Speaker 1: people are looking for Crunch to come in into the neighborhood.
Speaker 1: And the momentum we carried throughout the the pandemic has
Speaker 1: really helped us. Right if we opened about forty clubs
Speaker 1: last year and we grew in membership. So for us,
Speaker 1: that's a really good sign. As things open up and
Speaker 1: people get back out, we've only got growth to go
Speaker 1: from here. So Equinuh, Equinox always say it wrong. Uh,
Speaker 1: you know them well, a competitor and they're talking about,
Speaker 1: you know, going public via a spack. How does that
Speaker 1: potentially maybe some new capital being put into them? Certainly
Speaker 1: a well known changes like you guys, how does it
Speaker 1: maybe change the dynamics for you in the competitive landscape.
Speaker 1: I don't think it changes the competitive dynamic for us. Um.
Speaker 1: You know, we're we're in the game for a while now.
Speaker 1: We've got a longer term view. As you know, we
Speaker 1: had a transaction with TPG Growth just a couple of
Speaker 1: years ago. I know you and Gemen talked about that
Speaker 1: several times. They're fantastic partners. They love the business and
Speaker 1: and they like like you, who have also invested in
Speaker 1: the business, were very focused on where we can take this.
Speaker 1: I think looking at Equinox, that's going to be interesting
Speaker 1: to watch. Right, that's really the first time something like
Speaker 1: that could happen in our industry if that works out.
Speaker 1: They had significant losses last year and they're looking for
Speaker 1: a big valuation. So we're gonna certainly keep an eye
Speaker 1: on that. Right, see why happens with that, But it
Speaker 1: won't change our game plan going forward, Okay, it won't
Speaker 1: change it in any ways. It's interesting. Well, you know,
Speaker 1: it is fascinating to the private equity world. My former
Speaker 1: co host Jason Kelly has written about it and his
Speaker 1: his book Sweat Equity about you know, private equity and
Speaker 1: their involvement in the fitness world. How are they really
Speaker 1: great partners for you guys? Well, I mean every private
Speaker 1: equity firm is different, so I can only speak. We've
Speaker 1: had experience with our current partner, TPG Growth is extremely engaged.
Speaker 1: They did a tremendous amount of diligence on the business.
Speaker 1: I mean, they're fantastic company obviously part of the greater
Speaker 1: TPG that you know has a tremendous amount of business
Speaker 1: ownership at spotting trends and how businesses are going to
Speaker 1: perform in the future. So um, you know, they did
Speaker 1: a lot of research on our space. Obviously, we've always
Speaker 1: been bullish on it as management. I mean, we grew
Speaker 1: this company from no franchises ten years ago to almost
Speaker 1: sold right and we're approaching two million members here pretty quickly,
Speaker 1: so it's all worked out pretty well. And you know,
Speaker 1: TPG growth brings lot of sophistication into the business perhaps
Speaker 1: that we didn't have before. So we're just starting to
Speaker 1: take advantage of that and see those changes come into motion,
Speaker 1: which I think is really going to accelerate our growth
Speaker 1: going forward. So one thing I'm curious about is what's
Speaker 1: next and the future. I'm someone who's done yoga for
Speaker 1: a long time, and my yoga instructor, who have started
Speaker 1: with for years, was able to do things digitally and
Speaker 1: she's really carved out a niche that she really wasn't
Speaker 1: doing before. You know, she was traveling the world, you know,
Speaker 1: teaching courses and teaching in her in her home town
Speaker 1: as well. Um. But what's interesting is I was on
Speaker 1: a class the other day and someone was in Japan,
Speaker 1: someone was all over the country, and I do wonder
Speaker 1: about the digital role in the fitness business. How do
Speaker 1: you guys embrace it? Will it be important going forward
Speaker 1: or not as much as the world reopens in your view? Well,
Speaker 1: I think from that standpoint, in terms of the individual
Speaker 1: operators that he talked about, it's fantastic that they can
Speaker 1: expand their business right and getting people healthy, which is
Speaker 1: the goal of the industry anyway. It cuted our goals
Speaker 1: to help people get healthy, So the more people that
Speaker 1: are exercising the better. In terms of digital is important.
Speaker 1: Obviously there was a boom in it. Um. I think
Speaker 1: any brick and mortar business has to integrate that properly.
Speaker 1: Most of the companies in our industry, they certainly don't
Speaker 1: have the jobs to go up against you know, Apple
Speaker 1: in that space, or or Peloton or you know some
Speaker 1: of these others Beach Body that have been doing it
Speaker 1: for years. But you can certainly integrate really high quality
Speaker 1: content into your offering to supplement what your members are doing.
Speaker 1: We've been in the space for a while with something
Speaker 1: called Crunch Live. Our workouts, which you guys have spoke
Speaker 1: about before you know it jumped up to about a
Speaker 1: hundred thousand workouts the day. They've gone down a bit
Speaker 1: since then, but we've certainly looked at this as something
Speaker 1: we need to reinvest in and make an even higher
Speaker 1: quality product because our members do appreciate that. That doesn't
Speaker 1: mean they're going to drop their health club membership and
Speaker 1: switch over it is. It is a supplement and as
Speaker 1: far as the greater industry goes, you know, there's sixty
Speaker 1: million members of health clubs in the US and prior
Speaker 1: to this pandemic the industry has going at three to
Speaker 1: four per cent for about ten years. So as we
Speaker 1: come out of this, we do expect that growth going
Speaker 1: to continue to grow at that rate, maybe even faster.
Speaker 1: And then one thing that a lot of people don't
Speaker 1: think about is about thirty of the people who work
Speaker 1: out at home or have a UM, you know, some
Speaker 1: sort of supplemental exercise routine that they do also have
Speaker 1: to about membership. So it's not really either or you know,
Speaker 1: option amend each other and grow together well listen. I
Speaker 1: really great to check in with you, and I hope
Speaker 1: we can do so again a little bit later in
Speaker 1: the year and see how things are going, especially as
Speaker 1: the world fingers cross masks off that we continue to reopen.
Speaker 1: Ben take care of stays safe. Ben Midgley, CEO and
Speaker 1: founding partner of our Crunch fitness franchising on the phone
Speaker 1: in New Hampshire,