LIFTS Episode 124 – The $128 Million Recovery Tech Collapse: What Really Happened at Aescape | with Frank Britt

0:00So one of the things I find so interesting, again, I have one benefit over everybody else, which is I don't know much, but I find interesting people talk about this business in such a past tense kind of way. This is the business that's inflecting and is growing at the epicenter of a growth market, at the confluence of fundamental shifts in how consumers view their own bodies and self-diagnostics and the use of AI and tactile hardware. this is not a business that is a phoenix rising this is just the next chapter of what happens i wouldn't say i've underestimated the challenges of the business i think i underappreciated the size of the opportunity and i'm more persuaded after 125 days on the ground that the confluence of all the mega trends that you folks talk about on your show make this moment even more significant to the category that's emerging and forming around a new notion and concept of recovery.

1:01And in specific terms for our firm, we're in the right place at the right time. We couldn't be better positioned.

1:11Matthew Januszek:So we're live. Welcome to this week's episode of Lifts. I'm Matthew Januszek, and I'm here with my co-host Mohamed Iqbal for an episode that Mo and I have been very excited to have for quite some time. So Mo, I'll hand over to you to introduce our guest today. Yeah, look, we're excited. We're joined by a newcomer to the industry, Frank Brett, who is the CEO of Escape. Most of you listening have heard of Escape, the robotic massage company, but you might not have heard of Frank Brett. So I want to do a quick intro of Frank and I've had the privilege of looking at his bio before and incredibly impressed by his background.

1:49So Frank has a pretty unique operating background compared to people we've had on the show. He's worked across enterprise transformation, consumer technology, workforce optimization, PE education, and now wellness robotics. He was the chief strategy and transformation officer at Starbucks, longtime CEO of Penn Foster, senior advisor at Valor Equity Partner, and so on. He's also had leadership roles across IBM, Bain, and Valor. This conversation comes at a particularly important moment as it relates to his new appointment as CEO of Escape. Escape recently entered insolvency proceedings with reports citing a$157 million shortfall.

2:35At the same time, Escape continues to operate through a new vehicle, Escape Recovery Inc., after the assets were acquired early this year. This headline is obviously significant, but what I do not want today's conversation to become is a simplistic post-mortem because Escape was not an unserious company. It raised significant capital and attracted serious investors. It partnered with some of the strongest brands in fitness, hospitality, and wellness. In March 2025, Escape announced an$83 million strategic funding round, bringing its total funding to$128 million, and announced an expansion with Equinox to as many as 60 locations nationwide.

3:21And the product overall, we've talked about it a lot on this podcast, really sits at the center of several major trends, recovery, AI, robotics, personalization, luxury wellness, and also what we'll call labor light service delivery. And it's an idea that recovery is becoming core of the wellness experience. So the real question is not simply what happened to Escape, and we want to dig into that, but it's really about what does this teach us about a business that needs to scale? And look, we've, as I mentioned, talked about Escape a lot. I've had a chance to know its founder. I know the founding team.

4:02But I've always questioned just the unit economics of the product, the fit within the industry, and its ability to scale into the broader ecosystem. So Frank, we are so excited to have you on. You're new to the industry. It's your birthday today. We have a lot of appreciation for you making the time to come to Lyft. Thank you for joining us today. My pleasure. Thank you for having me.

4:29Matthew Januszek:Well, Frank, as you mentioned before we turned the camera on, 125 days in the industry, so quite a new sector. And I'm sure you're still learning a lot about the space. But probably just from my opening question, you've had a huge amount of experience in businesses in general, as Mo mentioned, a number of different sectors and a number of very prominent businesses. And I guess, you know, we talked to a lot of founders and entrepreneurs who listen to this podcast. And I guess just from your perspective, as an individual that's been involved in many different areas of the industry, what would you say was one of the things that you understood later about this business that maybe you could have done earlier?

5:19Matthew Januszek:And I'm not saying about maybe what the market necessarily misunderstood about Escape, but was there anything that you could say that you personally underestimated about the business when you got into it compared to where you are today? I wouldn't say I underestimated the challenges of the business. I think I underappreciated the size of the opportunity. And I'm more persuaded after 125 days on the ground that the confluence of all the megatrends that you folks talk about on your show make this moment even more significant to the category that's emerging and forming around a new notion and concept of recovery.

6:02And in specific terms for our firm, we're in the right place at the right time. We couldn't be better positioned. and I'll unpack why I think that's true and perhaps most importantly, how we expect to seize that opportunity and do so in a way with our very important partners we have across the country and continue to grow while we continue to build a world-class brand. You know, brands are no less important today in an AI economy than they've ever been. In fact, arguably they're more important. I have a lot of experience in working with and being privileged to be a part of some of the greatest brands in the world, like IBM, like Starbucks.

6:37And I think I know what brands mean and why they matter. And we fully expect to be the leading brand in the category of personalization as it relates to recovery and build a business model that delivers tremendous economic value to our B2B partners. And in the process, add significant value to their guest experience, their member experience, or whatever the persona is of the ultimate consumers they serve. Well, Frank, let's go ahead and start with the moment that the company is in today. There were many reports stating that ESCAPE entered insolvency proceedings with a reported$157 million shortfall and that substantially all the assets were acquired by a new entity, ESCAPE Recovery, which continues to function.

7:22And from what I understand, that's the entity that you are now a part of. First, I want to approach this with a lot of empathy because I think every company has a team of people behind it that work incredibly hard to bring the product to market. So I definitely understand that and have a lot of respect and value for them. But I'm curious if you could shed some light. So after I did a LinkedIn post when this came out, I read a lot of articles about it. And my perspective all along, and I've been very open about this around Escape, is I struggled to understand the unit economics behind it, everything from the COGS to the$7 ,000 a month leasing model to the ability for a consumer to pay 60 plus dollars for a session when you can, especially at the brands that you're in, such as the Four Seasons, Equinox, Lifetime, and others where consumers have the ability to pay more to have a human come in.

8:16But just first, what was the articles that were out and the reportings, was it misleading? Was it inaccurate? Speak a bit about where the company is today and kind of what happened over the last few months. Yeah, I think that, you know, we say oftentimes that context is worth 50 IQ points. And I think the through line of all of the materials I've read is that not that they're fundamentally inaccurate, they just lack context. There's no dimensionality to the story. So maybe I can help unpack what I've concluded is the actual story, not just the headlines that, you know, people like to write about.

8:57If you study businesses that are robots, businesses, and you think about the economics of early stage companies, what I think is often missed, and you hear a lot about this if you spend a little bit of time in the SaaS world, and now the robots as a service world, what that is all about is the idea that a company builds a world-class product that has meaningful relevance to its target customer, in our case, premium hospitality, premium spas, and premium health clubs. And the premise is that we go build that product, and then under the original model of how the company went to market, which is not uncommon, they went to market and went to show on as a robots as a service model, which on one level makes a lot of sense.

9:42It mirrors the SaaS model and hardware as a service that is the megatrend that we are all familiar with. where that is a fundamental mistake, I think is a fair way to say it, is it ignores the capital structure of the early stage company. And so when you are building and investing substantial dollars in R &D and frontier technologies, as we did, and then you have a go-to-market model that once you actually have commercial viability to the product, you actually finance the product for four years, that makes you a bank. And we don't want to be a bank. our cost of capital is 50 to 100 % higher than every single one of our customers.

10:21So why would you go to market in a model where we not only had to build and invest tremendous amount of money in building the product and innovating to make it viable, consumer relevant, aesthetically compelling, and all the other components that you've affirmed in the show many times. But it's not wise to then also finance the product for the customer. Now you might say, you've often heard in business, you know, don't ship your org chart to the customer. And the principle applies, don't ship your cap table to the customer either. However, in this particular case, it turns out the double bottom line winning formula is not that formula of robots as a service.

11:01It's a different model of go to market, which is a platform powered robot model where you go and do the innovative work and R &D work that is required to build a frontier your product, which we've done, and then you sell the equipment to your end customer because their cost of capital is 90 % less than yours. And in so doing, you have several positive things. For your company, it allows you to then be de-burdened of that ongoing cost because you actually capture their value earlier. And in so doing, it allows you to then take those dollars, reinvest in innovation scale. From the customer perspective, it's actually a winning formula twice.

11:39First of of all, the psychology of ownership is inherently different. When you own something, you treat it differently than when you rent it. And you get to depreciate the asset, and you have a residual value. So what we've done, our fundamental pivot in the last 125 days, is we've learned, perhaps the hard way, as many do, who are early stage robotics companies, that while robots as a service is a good concept, it is not a concept that connects the cap structure to the go-to-market model and our pivot is we have a cap structure that we have we'll talk more about that which is we are an early stage company that's a well-established fact but we've pivoted to go to market model so we can better align our interests with the customers and the customers interest with ours and so we are not aspiring to be a bank we're aspiring to be a robotics company that has a world-class brand that delivers demonstrative b2b value which we're going to also unpack in a few minutes as well as of course a compelling experience for the consumer so when someone asks in the elevator, why did escape not work?

12:40My conclusion with not having been there, so with all the humility that comes with not actually knowing, there are two fundamental reasons. One is mindset and the other is business model. The mindset challenge was the skills it takes to build a world-class product the way they did. And you know, those folks more, it's better than I do is a very distinctive competency that I admire enormously. And I'm proud of the people whose shoulders we stand on. However, that's an R &D mindset. And we're not an R &D company. We're a performance and execution business with a tier one brand that has to deliver value and have the momentum that comes with that.

13:17I know a lot about execution. At Starbucks, we had 40 ,000 stores and 100 million customers a week. I think I have a pretty good idea of what execution excellence looks like at scale. And we were not that. So we are pivoting the mindset. And I don't say the DNA, but the orientation of the company towards we're a performance company, not an R &D company, although we still do some obvious R &D and innovation. And then more fundamentally to the business economics, to your core question, we're pivoting away from the robots as a service model to what we call a platform powered robot, which means we should provide you the robot and you should buy the robot.

13:56We've lined up third party financing if you want to finance it. We radically changed the pricing, which is another thing I've heard that's not well understood in the market. We can talk specifics if you'd like. And then our job going forward is to continue to offer you a platform of services from technical support to improvements in the software, improvements in the reliability, advice on pricing, in-house marketing support, and wrap a customer support team around you so you can maximize the value of that asset for you, whether you're a hospitality company, a premium health club, or a spa.

14:29Matthew Januszek:So, Frank, I just want to go back slightly because maybe you just boil this down to, again, a lot of people that are in businesses. And what you've discussed is really the understanding of the business model. And it sounds, and I'm going to dumb this down into my language, but it sounds like a great idea. Certainly, you identified a problem from what I've understood from being in the space for a long time. Just the challenges of getting staff and a lot of the things even around humans doing this particular service is a challenge for many operators in itself, as well as I'm sure other things that I'm not aware of.

15:06Matthew Januszek:So clearly defined a problem that I'm sure is a lot bigger than most of us have understood. Clearly, some really smart people, as you say, from the design and development and the capability around robotics and AI, that seemed to be world class. But it seems from what I'm hearing is you've had a huge amount of experience, including companies like Bain that probably really understand many different businesses to a very, very deep level, as well as you mentioned some of your experience of scaling companies like Starbucks. And you've joined the company six months ago then. So if you were to explain this in simple terms, then, so great idea, great product, found a huge problem to solve.

15:48Matthew Januszek:But would you say then that when you came in, it's just really applying some business fundamentals in order how to take a great idea and to solve a problem, but making it in a way where it could be successful? And I'm talking for small people that have got an idea for an app that they're trying to build or someone to a gym like, you know, just relate those to any startup business person that may be listening today. I think that the company, my first day I had a company meeting and I had met with several people before the meeting at all levels of the company. And I said, I'd like to make an assertion today that we should discuss as a company.

16:26And we have about 50 employees. I said, every company has a superpower. Our superpower is the power of belief. And I admire that. But you can't win on belief alone. You have to compound belief into confidence, and confidence comes from performance and results. And so the arc of the story is an arc that says the company built a world-class product. It built a very distinctive brand that I think we can continue to elevate, but it didn't build the go-to-market model that was calibrated to the cap structure of the business and also the way customers wanted to buy. Customers want to own the equipment.

17:01They want to depreciate the asset. They want to know there's a residual value. They want to know that the product will be explicitly, not implicitly, with a set of explicit commitments to make sure it's uptime's right and make sure it has all the right support that it needs to continue to improve. And very much like a Tesla, you buy a Tesla, the car is not static. It perpetually improves. Every two to four weeks, our product is improving. And if you think about it from an LLM-speak perspective, we have more training data than any company in the country. We did 12 ,000 sessions alone just in April, alone.

17:33So one of the things I find so interesting, again, I have one benefit over everybody else, which is I don't know much. But I find interesting people talk about this business in such a past tense kind of way. This is the business that's inflecting and is growing at the epicenter of a growth market, at the confluence of fundamental shifts in how consumers view their own bodies and self-diagnostics and the use of AI and tactile hardware. This is not a business that is a phoenix rising. This is just the next chapter of what happens. And if you look at the through line of entrepreneurs from every conceivable industry, it's a very common dynamic where the business does its best work with its best thinking, with its best available information.

18:18Good, earnest people make the best choices they can with the information they have. It's rarely the right answer. You could interview Howard Schultz in this and he could tell you thousands of stories of how Starbucks didn't get it right. But the definition of great entrepreneurs is not whether they get it right. It's how fast they learn and how quickly they can pivot. And so we're building a DNA that we expect the world to become more uncertain. We don't expect things to be more stable. We're embracing uncertainty. We are a pro-entropic company. Pro-entropic company gets stronger through uncertainty and disruption.

18:51They're not weakened by it. They grow from it. They're not just resilient. They actually get better because of the disruption. We are getting better every week and every month because the market we serve is evolving. And that evolution, the best I can tell, structurally is changing in our favor on many dimensions, including, let's go right to the core question of affordability from both the consumer perspective and from the B2B customer perspective. So from the B2B customer perspective, you are right. Once upon a time, the product costs about$7 ,000 a month. If you were to purchase that product today, and this is available to all of our current customers, we have over 100 deployments in the wild today.

19:33That product is roughly$100 ,000 to$125 ,000. So there's been a 40 % reduction in the cost. If you translate that into CFO speak, we are going to be able to consistently deliver north of a 35 % fully loaded ROIC. And if you do the ROIC math across all the different sectors we serve, that is a consistently superior return on invested capital at$125 ,000 plus we have a monthly service fee. So if the argument is, well, it's too expensive to acquire for the B2B customers, that may have once been true. It is actually the opposite. It's incredibly compelling as measured by ROI. If you looked at it, oftentimes you hear people talk about revenue per square foot.

20:18You know, I come out of a retail background. Revenue per square foot for the average retailer in the United States is about$325. The average big box gym,$125. But that's not the right question. The question isn't what is the revenue per square foot. It's what's the profit per square foot. Because our business, in contrast to retailing, when you add growth in retailing, you have to add merchandise, you have to add labor, and you typically have more shrinkage. When we grow revenue, there's no marginal cost of delivery. So what happens is we're not percentages better, we're multiples better in terms of profit per square foot compared to any other format and any other product I've seen across big box gyms and you can go through the list.

21:00And so I don't say that with bravado. I've just done the unit economic math. And the unit economic math shows that the ROIC in this product at$125 ,000, given current utilization, whether you finance it or whether you buy it outright, is an overwhelming, compelling answer with a cash payback within 18 months with a profit per square foot that is double to triple the current value per square foot in almost all of the formats that we serve. Well, there's a couple of things that I can agree on with that. The first one is that you're right. Recovery as an amenity is moving to the center. And a lot of wellness brands, starting with the premium, going down to the value, are focusing recovery on the center of the entire fitness and wellness experience.

21:48is. And I think also you're right. I mean, consumers are demanding the product. I think operators are looking for a way to maximize profitability and to your point, revenue per square foot. I think the big assumption that a lot of the fundamentals you talked about rely on is the consumer. And I would put a couple of anchors there that I'm still struggling to fully understand. One is, will the consumer pay$60 to$65 per 30 minutes, which is what I've paid when I've used Escape at four seasons, right? I mean, both Matthew and I, when we vacation or travel in business, we like to stay at wellness-focused properties that have spas and have escape in some cases, or members of facilities that also offer them.

22:38But I still opt more for having a human therapist there, even though I have to do a little more. So I think when you're looking at the cohort that you're targeting, you're looking at the placements of where you've put the product. You're also looking at a consumer that will spend anywhere from 150 to 450 for an hour to 90 minute session. How do you address that? Because I've always taught, and I've talked about this a couple of weeks because it relates to escape is, I do think robots are the future in many, many areas. And I think you are leading the pathway there as it relates to massage therapy.

23:16But the cost per session has to come down. And looking at your ROI that you've talked about, that still assumes a$60 per 30 minute session. but I think a lot of us think that it needs to be 30 or less. Okay, well, there's a lot of things you just said. So let me just try to attack them in piece parts. So you pointed out that I'm new to the industry. And if you ask, well, how do you learn about different industries at a rapid rate? Because I can't make up for time. I look for patterns. And so let me share with you the pattern I've observed across countless consumer tech adoptions. And I'll give you the example of GPS.

23:5410 years ago when you bought your GPS you put in your car today every device you have in your life is aware of where they are and you would assume in all cases it would be incomprehensible if your phone didn't have it if your car didn't know where it was it just makes sure to who you are you would never have bought a doorbell with a camera in it five years ago that seems kind of crazy and now if you had any house you would always have a camera in your doorbell so why do I say that? There is a consistent through line of consumer tech adoption with consumers, and it goes like this. It starts as novelty.

24:32Then it becomes a bolt-on because you're still holding on to your old mental model. And then you start to integrate it into your life. And then at some point it becomes just invisible. It's just ambient to the environment you're in. Just like the examples I cited, just like when you use Spotify, you used to buy music. Now it's a different phenomenon. So the first thing to just know is don't worry about our industry. Just study every other consumer tech product that you already use in your own life and go back three years, five years, and 10 years, and you'll see the pattern is consistent. So what's going to happen here is this is going to become natural.

25:07It's going to be part of the environment. You will expect to walk into a gym today, walk into a hotel today and have a gym. In three years, you'll expect to find a recovery solution. If they don't have it, it won't make any sense because you're just assuming that's the way it works. So this isn't an elite product for the elite few. This is the democratization of body work for the mainstream consumer in the United States. This is a mainstream consumer phenomenon and self-diagnostics is at the core of it. As far as pricing goes, why are prices for any product what they are? So let's just take an example.

25:41In 2005, if you had bought a 50-inch plasma TV, it would have cost you$5 ,000. If you buy a 50-inch plasma TV today with a 4K smart feature, it's$250. So the first, another pattern of all industries, particularly ones that involve silicon and software, is that their patterns are always the same. The price of production comes down. Now, you could argue, if you wanted to be a contrary and say, well, it's not exactly fair because this category is both computation and physical hardware. Okay. That's a fair argument. But if you look at those two cost curves, it is, uh, it is inevitable and has been seen countless times that the cost curves will continue to come down.

26:29It is the case that they might come down a little bit faster for computation than for hardware. But if you were to buy a robotic arm five years ago, it's a hundred thousand dollars. You buy robotic arms today, it's twenty thousand dollars. So cost curves are coming down. That's important because it goes to your core point of the consumer. I don't expect the price point of this product for the consumer to be the same price as it is today. By the way, it's not averaging sixty dollars. It's averaging forty five dollars. If you look at the national average of massages across Natchez, SF and New York and Miami, it's about eighty to a hundred So we're still demonstrably less expensive today as it exists.