LIFTS Episode 122 – Your Gym Isn't Growing… Because Your Members Don't Show Up | with JJ Creegan

0:00Wow, not every store was hitting 4 ,000 members in six months. And why weren't we? And how do you dissect your lead funnel to identify where there's gaps in book show and close? And that's when you start to learn that frequency of visit in HVLP, in premium, in a boutique fitness is the biggest driver of revenue growth. Like no member that doesn't show up is helping you grow your revenue. And so how do you get smart and look through the funnel and evaluate where your systems and your people and the action that you're taking are getting Matt to show up tomorrow? And so just six areas of the business that I think every owner operator should invest in, should evaluate and maintain and really make changes with as your business scales throughout.

0:47And I think that's true for a brand with 7 ,000 locations. The challenges from an ERP system or CRM system or member management system are much more robust there at that scale than they are for someone who owns a handful of stores. From the flip side, when you make that membership management decision for your first store, is it going to scale with you to your second, your tenth? What other things are included in it or what else are you going to have to buy and invest in it?

1:19Matthew Januszek:We're live. Welcome to this week's episode of Lifts. I'm Matthew Januzek and I'm here with my co-host Mohamed Iqbal bringing you some of the latest news stories from across the health and fitness industry. I just wanted to start, I was reading this book called Inner Excellence which I've not been reading for a while but I got back into reading and it was very relevant to the conversation because as I was doing some research on JJ, the book essentially talks about high performance being too focused on outcomes and whether that's winning in terms of sport, making money or specific results, but not enough on the process of who they're becoming to get to that end goal.

2:04Matthew Januszek:And there was an interesting example where within the book, it said, how do you take a lollipop from a kid who loves lollipops without any resistance? So Mo, as I know you're a successful father, how do you answer that one? I don't think I'm a successful father. I'm still working on it. And sometimes I'm looking at you and you've certainly raised your kids right. That's a really good one. So how do you take your kids, how do you take a lollipop away from a kid? I mean, I don't give them one. That's really it to begin with. I just don't give it to them. And I think if you remove access, especially as you're developing, understanding what your behavior should be, understanding, you know, it's not about right and wrong, because even a child knows the difference between right and wrong.

2:48It's about what it's want versus need and also self-control and will. And I think a lot of that and controlling desire is something that is a learned trait that also develops in early years. So I don't know, as a father, I would say is the best way to avoid a kid from having a lollipop is not to have one around.

3:11Matthew Januszek:Does that work? JJ, do you have kids? I have 10-year-old twins, a boy and a girl, yes. And so my answer is give them an alternative. Give them something else, right? It's a trade, whether it's beforehand, right? Maybe you don't want to ever give your kids a lollipop, but you're giving them something, and therefore you want to take that something away. So what's the alternative path? Maybe it's something that you deem has less sugar in it. Maybe it's money, like whatever it is, you need to motivate them with an alternative. Yeah. Well, I think that Mo went very deep onto that particular question, which I didn't expect.

3:42Matthew Januszek:But yeah, the suggestion in the book was basically to give them a bigger lottie pot, which can change their perception. And I think it's, you know, when it related to this conversation, it's that, you know, are we in an industry very focused on short-term outcomes in terms of how we run our businesses and how we serve clients? or are we building the systems that produce more long-term change and adherence? And so I thought, certainly as I research you, JJ, I thought that was a relevant way to start this conversation. I'm going to hand over to my co-host now, Mohamed, to see if he can put his own perspective and introduction to what we're going to talk about today.

4:24Well, look, I think we're in a really interesting time in our industry and I'm going to introduce our host, or our guest rather, JJ here, shortly. But there's a lot that we're thinking about at this time of year. So we're approximately in about early Q2 right now. I think the industry wrapped up a really strong Q1. The top line headlines of everything that we're seeing is really strong. The U.S. fitness industry crossed $34 billion in annual revenue. Global Health Club membership is sitting north of 184 million people. So everything seems like it's really good. And you have different tiers. On one hand, you've got the value tier with Planet Fitness and the basic fits of Europe that are doing really well and are seemingly scaling, but Planet Fitness, from a public market perspective, is not having a great year.

5:11On the other hand, you've also got the premium tier pulling away. Brands like Lifetime and Equinox who are doing really well. But what seemingly is getting squeezed is really the middle. And the middle, depending on who you speak with, is in trouble. But we know a lot of our friends actually operate in that middle tier. So clubs price between$30 to$70. And recently, JJ, we had Mark Mastravan, who I think is really looking to play up in that middle tier with his re-interest, re-entry into 24-hour fitness. So that's what we're trying to figure out, but it's also a very crucial part of the market.

5:56And that's the industry, JJ, that we're going to be talking through today, which is this barbell market with the disappearing middle. But let's talk about kind of what's happening right now. I talked a bit about Planet Fitness and what's happening there. And a brand boutique fitness, which is seemingly shedding brands every month, is exponential. And that's been a topic of recent conversations as well. And obviously we touched on Mark Mastroff. So to help us unpack a lot of this, I'm excited to introduce someone who I've known for I think a few years now, JJ. You've been around the event circuit as all of us have.

6:36You've done an excellent job coming out of Orange Theory Fitness and then Purpose Brands as well. And now you've launched into your own consulting firm. So I'm really excited to have you on Lyfts. Yeah, I appreciate that. And your background, I started my career with Planet when there were less than 30 units in the U.S. And before the brand even rolled out the$10 per month model and was an early operator in the HVLP space, part of the founding team at UFIT, where during my time, we grew to being the third largest HVLP chain in the U.S. with about 130 owned and operated stores. And then I did just wrap up six years with Orange Theory, now Purpose Brands, and most recently the COO of that business.

7:15And post-merger, I saw an opportunity to help emerging wellness brands, a lot of them in boutique fitness, and build kind of what we're talking about, the robustness and removing fragility from their operations that normally a brand doesn't get to until they have 100 or a franchisor doesn't get to they have 500 stores. And so with technology systems and all the education and tools that exist out there, how can an early stage brand with 10, 20 stores kind of cement their path forward and make sure their operations and systems match the quality of the workout or their experience that they're delivering for members?

7:52Matthew Januszek:Well, JJ, you do a great job at promoting some of your ideas and experience on different platforms, social media. And I'd certainly recommend anyone start to follow you, particularly if you're in the industry. But one of the things that you've been talking about is the idea that most operators are still running on what you call founder energy. And the person who built the business is still the operating system. So when you look at something like Purpose Brands or the Purpose Brand Merger, 7 ,000 plus locations, two very different cultures, it seems like the problem is now sort of structural and not personal.

8:33Matthew Januszek:So when I was sort of reading into you, you talk about something called Scream. So give me a real operator story where having something like that in place has saved the business or addressed some of these challenges that you're referring to. Yeah, I think it's simple. I think if you're the innovator or the operator or the founder of a brand, obviously in fitness, you're creating either the environment and the experience. If it's boutique fitness, you're creating the workout. And then you're relying on your team to execute and bring it to life every single day. And so SCREAM is an acronym that I use to break down the way that I look at a business and its operations and its strength.

9:17And so the S stands for systems, and that's everything from your member management to your CRM system, your texting, SMS, how you're communicating with members or even your staff. Culture is the accountability, the standards, what's happening inside your business. within your people. And a lot of that includes your values. Then relationships and how do you develop your team members or how do you connect and really engage with your consumers? I think a lot of franchise brands have franchise advisory councils, but very few have member advisory councils and very few are taking great feedback from their members as they evolve.

9:51The E in screen for me is execution. And that's, you know, we had five opportunities to sell a membership yesterday, but we only sold two. Why? What are the opportunities? What are the gap there? and a is for action the speed at which we can pivot and this in today's world with technology and so many tools and resources if you miss out on today you miss that opportunity forever and if you miss out on a q1 of the business normally you miss out on the year and the management is just how you as a founder or an operator are creating the the tools to manage your team and have visibility into your business and so just six areas of the business that i think every owner operator should invest in, should evaluate and maintain and really make changes with as your business scales throughout.

10:35And I think that's true for a brand with 7 ,000 locations, what the challenges from an ERP system or CRM system or member management system are much more robust there at that scale than they are for someone who owns a handful of stores. But on the flip side, when you make that membership management decision for your first store, Or is it going to scale with you to your second, your 10th? What other things are included in it? Or what else are you going to have to buy and invest in it? So that's how I think about it. And it really breaks down. It goes further into the skill versus will that you would use to manage your team.

11:09It evolves to kind of the entire ecosystem of your business.

11:12Matthew Januszek:I've just got a quick follow-up question on that one. Certainly a lot of businesses, they don't always start with the ambition or the belief that they're going to get to 7 ,000 locations. Like you've probably been in many startups like Planet Fitness and Orange Theory that probably didn't start understanding where they're going. Do you think that strategy is specifically related to companies that have that ambition where they're going to go on and get sold or have private equity invested in them? Or do you think if there's someone that just is really passionate about, maybe has a spin studio and wants to open a few locations around somewhere like New York and just really loves it and sees that being part of their life and what they want to do and you know until they can't jump on a spin bike again you know what what do you see about those sort of two different models because fitness industry is definitely the industry where people are in it because they want to help people they're very passionate about the product that they're going to deliver and it becomes almost like a lifestyle to them so what are your thoughts on that JJ?

12:17My team and I and so we do two different things I mean I serve as serve as a fractional executive CEO, COO, or strategic advisor to emerging wellness brands. And we also coach small operators that are franchisees from one to 10 units. And we use the same framework for both. And so we work with an independent chain in the LA area and we're using, you know, okay, what's your relationship like with ClassPass and what's your, they're using an outsource sales team to do that. That's part of systems, right? And how is that working for them to operate their four stores? What does your weekly agenda look like for your team and your management?

12:58That's part of management. So my mind, I think this does scale from a one unit, four unit, 100, 500 unit operator, because it's what I've used since I opened my first gym that I owned and operated in 2010. So I think it does scale. I think the scope, the investment, the amount of people touching these systems are much larger at bigger brands, but an individual franchisee of, let's just call it exponential fitness, okay, they can't make a decision on their member management system. They can't make a decision on their CRM system necessarily, but they can choose which HR software they're using or what technology they're bringing in to support their accounting.

13:37And they can 100 % manage their relationships or culture, the execution, the action and the management that their team is taking. Is there a real operator story, JJ? You've worked across so many different brands and so many different business owners, but is there someone who you could talk about, whether you want to name them or not, but who thought that they had everything in place, thought that they're ready to scale, but then they found out that they actually did not? What did that moment look like? I think any business owner that celebrates hitting a goal. you know and so I just hit$50 ,000 in revenue or$100 ,000 in revenue and celebrates that win and that milestone and I think that's true we're all working towards a growth and so with my time at UFIT I was part of that team from concept to private equity raise and to the peak of that business and I'll tell you the first 10 stores were proof of concept we're like can we hit the membership numbers that we wanted, right?

14:37It was really just a hustle and a grind to get each store to 4 ,000, 5 ,000 members. Okay. Now we're going to do this. Can we do this in different geographies was the second phase of the business. It was really when we went from our backyard of Florida to different States that for me, digging into this framework and building more robustness became real because wow, not every store was hitting 4 ,000 members in six months. And why weren't we? And how do you dissect your lead funnel to identify where there's gaps in book show and close? And that's when you start to learn that frequency of visit in HVLP, in premium, in a boutique fitness is the biggest driver of revenue growth.

15:20Like no member that doesn't show up is helping you grow your revenue. And so how do you get smart and look through the funnel and evaluate where your systems and your people and the action that you're taking are getting Matt to show up tomorrow. And so in HVLP, I learned very early on that if a member didn't show up nine or 10 times in their first 60 days, they were going to cancel by month three. In Boutique Fitness, it's relatively the same, just a much shorter timeline. And that's even exaggerated more at the premium markets end of the market. And you've now talked about three brands where I think you helped them get to their peak, meaning Planet Fitness, Ufit, and also Purpose Brands.

16:03At the same time, you've also seen them kind of plateau and in some cases decline. Planet Fitness appears on paper by all accounts to be growing. They are an ABC Fitness customer as well, so I've got visibility into that. But at the same time, same store membership is actually declining. That's really interesting. Which could also be a good thing because that frequency number is going up, So they need to almost pull back on total store memberships and open up more stores, which they've been doing. Then you talked about UFIT, and you were with UFIT really through its peak, that PE sponsor and then opening up locations going out of Florida, as you mentioned.

16:44And then Purpose Brands, where it's probably the largest operation you were a part of. But in some cases, they've also flattened and they're looking for ways to grow. How do you know from all of your experience with those three mega brands, how do you know when you're peaking? Yeah, I think, look, in franchising versus company owned, it's a unique battle because in franchising, you're selling licenses based off of the momentum that's behind your brand and you're forecasting that this is going to continue. And as we all know, in this industry, it doesn't take three months to open a new fitness facility.

17:20Sometimes it takes over a year, depending on real estate availability. And so you don't know what's around the corner. And so I think for a lot of boutique fitness and independent owners and operators, the 2020 through 2023 period really shifted things. And that's when the rise of Pilates and really yoga started to peak and consumer trends with GLP One. And so I think for mature franchise brand, it's tough when you have a ton of momentum behind your brand and a ton of interest in selling. It'd be really diligent with your white space and the responsibility of it. And you also have to build in boutique fitness a brand that is agile.

17:55And I very much believe, you know, my time at Purpose Brands was focused on Orange Theory. Love the workout. I almost took class this morning. I just slept in a little bit. And so I missed my 5.30 a.m. And they're doing a lot of innovation on their workout to meet the strength training trend and work that was started when I was there. And they're continuing that. And I think hybrid boutique fitness brands that mix cardio and strength really have an opportunity to evolve over time. But with franchising, you know, you had 100 people buy licenses last year and their pipelines and that does impact the business.

18:30I think when you are company owned and operated, the way that I think about it is how can I constantly be chasing down the one tweak of the dial, right? What's the one KPI can turn a little bit to the right or a little bit to the left to optimize it? And eventually at some stage, it's going to be a cost number. How much is it going to cost me through my tech stack and processing or HR? And you can look at all those things and find money there. It may be something in your sales funnel. It may be something in consumer outreach. And or it may be adding a second modality to it. But I think this business has always been dynamic.

19:11I mean, Pilates is on fire right now, and it's been on fire in the past. Will it be on fire forever? Probably not, just like every other modality has seen its peaks and valleys. But great operators, whether they have a big brand name behind them or not, still thrive. I mean, think about Gainesville Health and Fitness. Or I live in South Florida. There's an independent boutique studio in Delray Beach, Florida called Slash Fitness, which has been there for 10 years. I have no idea what their financials are. I've never worked with them, but if they weren't successful year after year, they would not still be there.

19:46And it's because they have a great experience, great following. They invest in their team. They invest in the workout. They adjust. They lean into social media. And they bring in great tools, which I think is really important in today's age with AI and technology. Like, how can I simplify what, honestly, you probably suck at because you opened a gym. And how can you focus on the things that really deliver those moments of magic to your customers?

20:08Matthew Januszek:This week's episode of the Lyfts podcast is brought to you by eGym. eGym is building the future of smart fitness. Their connected ecosystem combines intelligent equipment, AI-powered software, and the WellPass corporate wellness platform to help operators grow their business and deliver measurable health outcomes to exercises of all shapes and sizes. From powering gym floors to supporting employee wellness, eGym is redefining the workout one rep at a time. Learn more at eGym.com. What do you do, JJ, when it requires more than just a fine twisting of the dials a little bit? Because there are some businesses where I guess you get into them and they've probably left some of those changes too late.

20:52Matthew Januszek:Like another one of your posts where you talk about the death of the transformation challenge, where you wrote something that stuck with me, which is the biggest loser ran for 17 seasons and essentially trained an entire industry to run Q1 weight loss challenges on autopilot. and your words were at this point it's not a strategy it's muscle memory and the consumer of those challenges were built for limited data one goal to lose weight fast and that person now has a wearable a telehealth account and probably a gl1 prescription so where you've had these things that have been around for a while and many many businesses just almost like rely rely upon that and they take a back seat what do you do when you have to come in and you have to do more than just a little bit of a tweak.

21:35I mean, that's where, when I think about earlier, when I talked about relationships and, you know, staying in touch with your customers. I mean, for example, are, you know, consumers have been talking about both male and female strength training for years. How many fitness facilities are testing strength? Right? Very few. I mean, take 18 year old version of me. I was testing my strength every Monday on National Chest Day inside the gym and writing down what my back's bench pressed when I was in my teens and 20s. But how can you create these simple moments to allow the customer to connect the dots between, you know, what your wearables telling you what your goals are.

22:18And so many, you know, fitness consumers aren't focused on weight loss anymore. It's still a big part of what our country needs, but there's a new solution for it. Right. The new solution is in the form of a medication and it's supported by fitness, but the younger demographic is craving strength training. They don't all know how to do it. So how can we create these moments where once a month, once a quarter, there's a brand, AlphaFit Club, that does a peak week every 13 week and measures strength improvements in their progressive programming, which is really smart. And it creates an opportunity for customers to see their improvement.

22:55Orange Theory obviously does benchmarks throughout, but a lot of them historically are cardio based. One mile run for distance, you know, 2000 meter row, my personal favorite 200 meter row, because I'm done in less than 30 seconds. But like, how can you evolve this to being a more strength based as consumers are looking into it? And if you think about it to go back to in the US, your presidential fitness test, I mean, as the fitness population ages, mobility, flexibility are going to be extremely important. There's a small tailwind with these things starting to gain traction in the industry. Are we helping customers test that and measure that?

23:36And not just to sell personal training, which is normally when you would see this. But how do you bring it into part of the experience to engage your customer and add value? Now, I don't know if you're going to have a stretching challenge inside your facility in the way that you're going to have a weight loss challenge, but you can definitely do strength-based challenges. You can do adherence and frequency-based challenges. You can bring in, have customers do different things where they're impacting their workouts based off of their sleep and recovery to tie this full ecosystem into the facility.

24:08JJ, you said so much there to unpack. So first, let me start. The Presidential Fitness Challenge. I'm an immigrant. I came to the U.S. in 1991 and moved to New Jersey. And it actually is what set me on my entire fitness journey, believe it or not. I know Matthew's heard this before, but I don't think we've had a chance to speak about this. But freshman year, part of that was to run a mile, right? That was one of the tests. And then you do the sit-ups and the pull-ups and all that. Well, in the mile, in Bergenfield High School in New Jersey, I was last, not just with the boys, but with the girls too.

24:43and it was definitely embarrassing, but it was definitely a moment to be like, wow, I came in last. But by senior year, so I took that upon a goal. I bought a book in 1993 called, published in 93 by Michael Hogan called Optimum Sports Nutrition. I picked up running and by my senior year, I set the mile record at the high school of 432 and I continued to run. Now people know me to run. But that is what was the impetus to have that movement come within me. And a lot of children miss out on that. But I want to go back to some other things you said, which is the assessment. So we're seeing brands start to do that.

25:24You mentioned Orange Theory. But also there's a brand that I came across called Rebel Fitness out of Australia. I'm sure you've heard of them. And every three months they work on a progression, a program. They do an assessment after three months, and then off you go to the next program. And I feel like that progression is really, really important. The other one I want to talk about is the growth of high rocks. And in a lot of ways, high rocks fulfill the very thing that you're talking about, which is a way to measure yourself. And I'm convinced that a big reason why people continue to do high rocks a couple of times a year is because it's that moment where they could dissect and say, how are my splits?