Lise Kuecker - The State of Boutique: M&A Activity, Pilates Trends, and Opening Strategies

Hey friends, welcome to the Future of Fitness, a top-rated fitness and wellness industry podcast for over five years and running. I'm your host, Eric Malzone, and I have the honor of talking to entrepreneurs, innovators, and cutting-edge technology experts within the extremely fast-paced industries of fitness, wellness, and health sciences. If you like the show, we'd love it if you took three minutes of your day to leave us a nice supporter review wherever you consume your podcast. If you're interested in staying up to date with the future of fitness, go to future of fitness.co to subscribe and get weekly summaries dropped into your inbox. Now onto the show. Empower your staff, engage your members, and unlock your next chapter of growth with software design for you. For a limited time, get a very generous 50% off your first month. To redeem the offer, simply contact the teamup sales team and use the promo code the FutureOfFitness. Headgoteeup.com. That is G-O-T-E-A-M-U-P dot com. Hey friends, this is Eric Malzone, and this episode of The Future of Fitness is brought to you by the Podcast Collective. Since our inception in 2023, we have emerged as the fitness, health, and wellness industry's premier podcast placement agency. We're honored to work with many of the industry's most prominent technologists, thought leaders, startup founders, and business executives. Why? Because they recognize that being on podcasts is the most effective way to authentically connect with their specific target audiences and rapidly grow a lucrative professional network. From podcast placements to speaking engagements, go-to-market strategies to investor relations, and media kits to press releases, the podcast collective brings a level of professionalism and deep industry expertise that can only be achieved by spending decades in the trenches. If you are a startup founder, business executive, emerging thought leader, or simply a savvy operator that understands the power of authentic media, learn more at podcastcollective.io and feel free to book a 30-minute strategy session with yours truly. Traditional media is dying on the vine. Podcasts are rising quickly to fill the void. Do not miss the boat. That's podcastcollective.io. All right, we are live. Lisey Keker, welcome back to the future of fitness.

So good to be here.

Uh it's a pleasure. You are a fan favorite on this show. So it's uh I learn a lot. I've already learned a lot, and it's only been 18 minutes of us chatting uh prior to to recording, which I always wish I recorded. But uh Lisey, it's it's always a pleasure. Before we dive into everything we're gonna talk about today, we're gonna talk about you know the boutique world. You're smack in the middle of it. You're doing a lot of work, you're influencing a lot of people, you're doing a lot of innovation in that space. We're gonna talk about MA activity. I'm gonna talk about the profession, oh geez, professionalization of boutique. Tough word, tough words for Friday. The aggregators, the world of Plotties, which is obviously very hot and talked about quite often. And one thing I'm really excited to chat with you about is kind of the art and science of openings, like successful openings and what that means and why it's so critical, not just for the short-term success of a boutique business, but the long-term success as well. So before we get into all that meaty stuff, uh, Lisi, just give us a quick reminder who you are, and then we'll we'll get right in.

Sure, sure, sure. So uh I'm Lisi Kiker. I am the CEO and founder of Studio Grow. We are now a 67-member uh organization that supports boutique fitness growth all around the world, 48 countries and counties, doing everything from amazing and epic projects that we're launching in the functional medicine, wellness, and boutique fitness combo spaces here in the States and abroad to opening a whole lot of new studios in the next 18 months. Yeah, it's been it's been amazing to dive in. I've been in this industry for a long time. I'm a former studio owner, building uh a brand overseas for the last uh 18 months on this. And uh, and I love having my hands, uh, my hands deep in in everything boutique fitness because it's an industry that that isn't slowing down anytime soon.

Yeah, I love it. So last time we talked, you were kind of teasing this project you're working over on over in Europe, I believe. So maybe give us, let's start with that. What what are you up to?

Yeah, yeah. So so we we've been uh we've been doing some pretty big work overseas on uh on a brand that I think has a lot of legs. And uh we're finalizing some of the financial support, we're finalizing some of those things right now. And and I I'm I'm loving it because we have really taken an idea of fitness, but we've interwoven in, I think, some critical people from outside of the industry. I think I think we've got people in fitness who know how to do fitness really well, but fitness has become something more than fitness. We're we're at an experience that people are driving in for an experience. That's what they're looking for when they come to us. And that goes so much more beyond just what they get in a class, what they get in a private session, what they get when they walk onto a gym floor. And so we started interweaving, you know, some of one of the best architects in the world, started interweaving in some remarkable creative directors that you know came from Cartier, they came from Google, they came from places and brands that we know and we think of as incredible brands. And we started saying, like, what can this truly look like? That obviously still gives a remarkable fitness experience that doesn't scroll in beyond that, but interweaves in so much more to make this extraordinary. So we're still, I think, in the in the immediate stages of this. I was really blessed. This was uh originally a project, Robin Klaus, who was just a brilliant leader in the fitness industry, came to me and said, Hey, I think this has legs. When he passed away, this was something I kind of held on near and dear to my heart and said, I think we've got an opportunity that we'll have on this. And I think we uh we really have it at this point now. So we're running with it and it's exciting to see. We'll see if it comes to fruition. You know, it's always the fun thing. But what it's given us more than anything, it's given us, it's given us, I think, alarms of where fitness is going to have to evolve and go to, which is really in this interesting mix between traditional fitness and some people are already testing this. I don't know if you've watched Zero at all. You've seen this, they opened in Dubai. Yeah, and I think that's this that's an interesting. They opened in as the first kind of, we'll call it true wellness retreat and hotel. Montenegro's uh coming soon. And I think they're they're planning on launching, as I had heard through the rumor mill, they're planning on heading to Asia next. Dubai was their first one, they're sitting right downtown, and it really built this epic experience of having this incredible fitness center embedded inside it, a really remarkable hotel that is entirely wellness driven. And I think uh I think examples like that that we're starting to see that are popping up take social wellness, they take all of it to kind of the next level of where we can go with this.

Yeah.

Exciting.

Yeah, very exciting. You know, I was I had Eddie from Afflitech on the podcast recently, and we were talking, and I I agree, and I've been trying to think about this, and maybe you have some ideas, and we don't have to solve it right now, but I feel like the industry needs a new name, like a complete rebrand. Like we're not necessarily fitness, right? But we got health coming in, right? We have hospitality, like we just haven't figured out a good name yet. And as soon as we do, I'm gonna go trademark that shit right away. But I feel like there's something have you thought about this? Am I the only one that you feel like we need a new name?

A lot.

Okay.

Like, I I feel like our industry, and and it's been a conversation I've had so many times. Our industry needs a rebrand. You know, I hate the term boutique fitness. I mean, I I use it because people understand. That's what yeah, that's what people know. It's the current name on this one. And yet, what I feel like we're doing really well goes well beyond boutique fitness, and certainly what boutique fitness looked like 20 years ago or things of the like, it's just a radical difference. As an industry, I think if we're gonna want to penetrate deeper into a consumer market, which I mean, what are we at? Like 20% roughly in the United States that we're at?

Depends on who you ask. Yeah.

Yeah, it's it's uh it's it's realistically, we're barely hitting uh the tip of the iceberg on this. And so if we're gonna open this up and really drive uh more consumers into this and consumers who are passionate and dedicated to this, yeah, I think we need a total rebrand uh on where this is. And we need to come at this from a very different angle because the conversations that I have with trainers and teachers and instructors, and quite frankly, you know, those ancillary services that are starting to surround us, the functional medicine doctors, the longevity experts, the biohoglers that are all interweaving into this industry, they know this is something different. They're all they're all talking, they know how much we've evolved, they know where we've gone, and yet, and yet, yeah, the brand of what that's gonna be. Someone's gonna have to step up and and really be willing to, I think, throw their hat in the ring and say have something very different to have the industry the industry.

I'm gonna work on it. I'm gonna work on it. Yeah, it can't be wellness either. I'm no wellness like gives me it gives me a weird feeling.

And I think wellness is just so generic.

Yes.

I mean it's almost to me, like this is just sure it's controversial on this one, but like wellness seems very benign. Like I am well, and I'd like that doesn't do it for me. Like I want to be specular, I want to be helper, I want to be like my Pete, I want to be well. That's not an answer that like I'm define my life.

Yeah, so when people ask you, well, how are you doing? I'm I'm well, right? It's like Eeyore, I'm well, I don't know. Like I want to be like, no, I'm kicking ass. Like I feel great. Yeah.

Yeah, it's so I I have I have a little bit of an antipathy towards the worry.

Yeah, okay. Well, let's get into the meat. Um speaking of the the evolution, right? You know, like the word I was trying to spit out earlier, the professionalization of boutique. Like I think for most people would assume who are in the industry that last year was was a lot full of headwinds for boutique, right? There was a lot of challenges. I think you and I talked about that. Now you mentioned like there's there's some advancement, there's like an A activity. It's growing up, right? Like there's there's the financial component of it. So maybe give us some a high level view, like what's what's going on in boutique.

Yeah.

So so we ended last year with two really strong acquisitions. And last year, beginning of this year, I'll say, with uh with Barry's and Solid War, you know, both of which were rumored to be in that like roughly 600, 750 million dollar range. And it's the first time probably since Soul Cycle that I think people really have this moment of like, yeah, this is something we want to be looking more into. So I've been shocked by the number of private equity groups that have reached out, quite frankly, since since roughly January to us and just saying, hey, what we're looking for. And they're looking for investments, they're looking to really bring the next solid or the next berries to life. What's interesting is there's uh, you know, this major differential between what most people in the industry are at and at solid core and berries, which are sitting with rumored Gibidas somewhere in that $30 to $50 million range. You know, when we started going and digging and looking for, you know, do we have, you know, numerous acquisition targets in that $10 to $30 million range that most private equity firms that are mid-market would be really interested in? The answer is we don't have a lot of that. We have a lot of people that are sitting in that, let's just say just sub $10 million EVADA, maybe downwards to $3 million EVITA. You know, they may have anywhere between, you know, 15 and 30 locations that they've got going, maybe a little bit fewer if they're just absolutely killing it in regards to uh profitability and numbers on this. We have a lot of people that are sitting in this, you know, I'm gonna call it kind of a dead zone. They are they're just underneath where a lot of people want to be. So they're they're seeking more private rounds of funding and investing and things along the like. And I think there's a real opportunity coming for consolidation. And we're already seeing that with groups that are are sitting, you know, anywhere between three and 15 studios. And, you know, when they're coming to us, they're saying, how do we really grow rapidly? You know, we're building out an MA strategy where, yes, we want to open as many locations as we can, but we're gonna grab as many, as many, you know, good spots and reasonable, reasonable studio grabs as we have an opportunity on. There's great locations, great studios that have reasonable numbers of members, but quite frankly, since you know 80% plus of studios just aren't profitable, there's plenty of massive opportunities to go in, secure those key locations for very low dollar amounts and pretty rapidly grow. So we're seeing some massive opportunities where I would expect over the next two to three years, a lot of these brands that are sitting anywhere five to five to 15, 20 locations, they're going to take this MA approach in its small scale. It's a studio here, two studios there, but they're gonna add that in to their, hey, I want to open five, six, seven studios this next year. And that's gonna allow them to pretty quickly hit the 40, 50, 60 studios that I think are that that magic number they're gonna need in order to get these big buyouts and numbers that we're looking for. One interesting side note is the number of people that are choosing to go corporate versus the number of people that are moving into the franchise model.

I mean what do you think that is?

Look, I mean, I think I get it. I mean, I'll give you a few ideas. First of all, in boutique fitness, it is really hard to get to the even in numbers that you need and the levels that you need to see the returns that you want on these franchises. I mean, if you've got a large-scale health club and you've got 500 locations, you are making lots of money, probably as a franchise work. On the flip side, if you have something similar in boutique fitness, where just the average shop value, you know, there that revenue is not nearly as high, thus your percentage is not nearly as high. Yet your overhead of needs to support those people is still pretty doggone relevant, similar to what we would have seen for these bigger gym concepts. I think it's a real struggle and a real fight to make those numbers work. Can yeah. I mean, there's obviously, I mean, Orange Theory is obviously an example of someone who has historically made this work and had these, you know, mass, mass member counts of, you know, 700, 800, 1,000 numbers go in. As the market gets more and more competitive, as consumers get more and more savvy, which the pandemic certainly helped them to get incredibly savvy about all things, fitness and yes, even wellness. I hate that word, on this. I wonder that it's I wonder if it's going to be more and more of a struggle to make that happen. On the flip side, corporate locations where you can control everything, including ideally the structures, the systems that team to make you as profitable as possible. Now that's where we're seeing the mass, even at numbers. That's where we're seeing the numbers that that reflect the fact that these are strongly profitable locations. They've systematized and built them very thoughtfully. It's hard to replicate that same level inside of a franchise. Still think that there's some great franchises that are out there in boutique fitness. I still think that there's some remarkable buys, and I think that there's uh some remarkable opportunities going in. But I'm just amazed at the number of people that are coming to us in Argoscope Division. Whereas if I would have just looked three years ago, even to the number of people who were like, I'm franchising and franchising and franchising, to the number of people that are now, first of all, just saying, hey, before I even look, I want to see full feasibility students between franchise and corporate, or to the ones who are just like, I just want to go corporate straight away. It's an interesting shift in the mindset of the of the up-and-coming brands inside of fitness.

Yeah, it's it's really interesting. I mean, I Rick Mayo was on the podcast recently as well. And you know, we every time he comes on, he's always emphasizes like the undercapitalization of people who want a franchise, especially in the boutique space. Like you gotta have five million in the bank, right? To in order to scale this out, like everything that needs to go in to be successful. I don't think people, you know, uh conceptualize that correctly, or maybe they get the right advice when they're doing it. And speaking of MA and consolidation, this week, as we're recording this, of course, the the sequel brands from uh Anthony Geisler was announced. So he's back at it again, right? He's doing it again. So that'll be interesting to watch. And uh yeah, I don't know. Any any initial thoughts when you read these headlines? You're like, whoa, okay, here we go, buckle up.

I mean, I think I I don't know him personally. I I don't have any, I I can't speak to him on on a personal. I think it's it's a really hard sell because you're you're buying into you're buying into a brand and ultimately like the integrity of the brand, stalidness of the brand, the growth of the brand that you see, you know, I think um feel much better if that was coming out after some of these things were cleared and and we're no longer hanging over his head. Yeah, I again I you know I don't know him. It's it's one of these things. You know, if these are going to be things that that that he's there's gonna be no investigations, there's gonna be no anything uh that is coming soon. In my mind, that's a a wiser time and a wiser season. We're sitting, I'm sitting in Chevroletsville, Virginia, I'm right off campus at UVA. Extraordinary Brands was was started by one of Ren, uh my uh this child's one of his classmates' fathers, Paul Flick, who's just, you know, super talented guy and has a massive amount of experience in in the uh multi, multi-brand franchise umbrella world. I think it's gonna be really hard. I think it's exponential. Uh and I think there's gonna be people that are gonna do it like Paul on a on a on a uh a leaner, very thoughtful. Like he's being so ridiculously thoughtful with the brands he brings in, the care that they're giving, things like that. But I I I I might be I might be like a negative Nancy here, but but I think it's gonna be like hard to replicate that again.

It was really interesting when I was I was looking over this morning of the brands they have. And there's a Pilates brand, there's something similar to Stretch Lab. I think it's called iFlex. There's a red light therapy specific boutique, and then there's and then there's the uh EMF suit type experience, which are different.

They are different. I mean, I I think you know, we're gonna talk Pilates, so I might as well might as well say this now. But I think I think one of these things that that is fascinating is you know, we have gotten into what we I consider niche. So it's not just Pilates, it's like red light Pilates, like red light method, not uh I've not been a thing. Is there a red light Pilates? Oh, it is. It's called red light method, and they're crushing it.

Oh, I've heard of that. I just didn't know what it was. Okay, all right.

It's the woman who originally started Club Pilates, and and uh and clearly since uh since I got woken up by one of my friend's husbands at 6 a.m. and I spent the morning watching, uh holding her hand with a kidney stout, her name is going to escape me at this point. But the last I looked in the first six months, I think they sold 52 units. Profitability is extraordinarily high on that, you know. So so it's it's interesting that these niche uh multimodality recovery and fitness. I mean, some of these things are really significant opportunity on some of those. So I like the idea. I like that he was willing to go into something um a little bit, a little bit different and and throw his head in the ring with some of those types of things because I do think that those are the concepts that we're seeing perform exceptionally well that are they're not the norm. And so you're no longer competing with you know 12,000 Pilates studios. Like it's a conversation we have with a lot of people that are starting brands. It's like, well, tell us what's really gonna be different. Like it can be done so well and done so different. And quite frankly, there's so much room for growth left in the Pilates market, but you're gonna have to be thinking differently about this. And it's not enough to be like, I have nine reformers, come. There's choices, and people ultimately choose the cheapest or the best. And uh, I would really like them to choose the best, but but that's I think where they uh where you deal it.

Uh wise words. So, yeah, niche Pilates. Let's get into that a little bit more. Red light, Pilates, never heard of that before, but now I've heard of the brand Red Light, whatever that was that you mentioned. Red Light method, thank you. Uh what else? Like, what else is going on in the world, Pilates?

Yeah, I didn't. I mean, so look, annual growth rate of Pilates sitting at around 16% in comparison. I think rich boutique fitness growth rate is is somewhere we're like 6.7%. So we're seeing a massive difference. We can see that the Pilates is outpacing it. So a few things just before we like dive deep. First of all, I think Pilates was heavily developed pre pandemic in a lot of what we would have considered tier one markets. So New York City, you could find plenty of Pilates studios. LA, you could find plenty of Pilates studios. Did they exist elsewhere? Of course. Were they anywhere close to maximum capacity? Not at all. Pandemic heads was seen. These mass closures in the Pilates role, especially in tier one markets, who were shut down in some cases for two years, what have you on this with reasonably high rent. They had large amounts of their client bases leave those areas. And suddenly, I think, you know, this provided this wave of people that like loved Pilates, but were spreading their wings and spreading out into different markets. Of course, at the same time, you see the rise of brands like Club Pilates, like Solid Core, SLT on kind of more a more niche New England basis that start to really attract people and say, okay, Pilates is more than just this, more than just what we would think of originally. Now, Pilates at this point has evolved like what I would call three primary components. So you've got uh contemporary Pilates, which makes up probably 60% of all the Pilates studios we're seeing right now. This is uh more of an evolved method of Pilates, for lack of a better term on this, that's willing to uh blend the teachings of Joseph Pilates, but also uh weave in a lot of new things modernly. So you see a lot of blended classes that might incorporate bar, they might incorporate uh things that we would see from personal training, they might incorporate other things. Just the method is what we would consider evolved. Of those traditional uh contemporary studios, you are seeing probably uh 90% of the openings right now are in reformer-only studios, which is interesting because traditionally Pilates was done largely privately and then in a small group setting. So we're seeing this wide like rise across the board of like all I want is reformer Pilates. I do not need private contemporaries. Then you have the Legris style of Pilates. And I'm gonna say that this was in my mind founded by Sebastian Legris. He built a machine called the Megaformer. We've seen several spin-offs of that. This is a very athletic form of Pilates. A lot of people would say it's not really Pilates, it's its own methodology unto itself, but it's Pilates inspired. We'll go on ahead and say, I would have said that if you would have talked to me five years ago, maybe five percent of studios were this, or probably at about 16%, 18% of studios from our calculations are Legree based. They're obviously being led by Solid Core and celebrated.

He's been around forever, right? Legris been around for very long time.

I mean, yeah, I still remember the first time I walked into a Legris studio, I feel like Remy was two and he's 17 now. So, like that's at least 15 years ago. And so, you know, we're seeing this extraordinary interest. There's a lot of room for growth in that. And that's interesting because while Pilates, that is contemporary Pilates, is probably 95% female in the audience that comes, even though I think it could be a lot more male-dominated. When you walk into a Legree style studio, it's very different. You're you're seeing a healthy amount of men. That is something where my husband on his own is in those classes and is psyched to be there. Yeah, I was dragging a couple of NFL players around with me for some workouts last summer. And and it was that was the one where they were like, we're going back and back and back. So it's very something that I think has a maybe wider natural reach because it automatically uh is drawing people in. And then you've got classical Pilates. So uh classical Pilates, look, this is like Joan Pilates died. This is what he gave us, this is what we're going to teach. It's a very simplified version. Nobody get mad at me that I simplified it that simply. I actually think for people who love classical Pilates, there's actually a massive opportunity right now. That's maybe 5% of studios. But if you want classical Pilates, you want classical Pilates and nothing else. And so, you know, we're seeing from a Google search term uh from an SEO perspective, these are people that are just thriving on rinse. So, so Pilates world overall, America has still lots of room for growth. Where do we see the growth coming? I think the APAC region is where it's gonna be. I certainly think the Middle East has massive opportunities for this. And I am waiting for the club Pilates and solid cores of Europe to start up because my God, it's it's it's it's it's a ripe open market. For anyone who wants to do that, come to me. I'm ready to start that. I was talking with one of our clients who is uh one of their the largest Pilates education brand worldwide. And I think roughly 70, uh, 70% of their students and their education program were in the Asia Pacific region, almost all of which were in actually China, China proper. And so that's telling us that, you know, this market has a lot of room to grow. Normally, I think we see a rise in education, and then we see a rise in studios and consumer growth. Social media is helping it a lot. Pilates girl is a thing. It's been trending for for roughly two years and uh shows no sign of stopping. And if anything, I think uh if you know, let's just say between 2010 and 2019 was dedicated to bar, I think certainly the next decade is dedicated to Pilates. It's it's got massive growth opportunities.

At the ground level, why do people like Pilates so much? Is it the the results? Is it the typing board? Is it just fashionable? Like what is it?

I think it's I think it's a combination of things. First of all, the results are it is short. I mean, I I've been doing Pilates for for 20 years. I started basically in my very early 20s. That was the first time that I did this. You know, I I came to it as an ex-dancer, and I think you hear a lot of people who do this, but it just felt good on my body. And I had never been strong. I still, I always have lifted and you know, still was lifting two or three times a week. And I remember when I started Pilates, literally the leaps I made in the gym were absurd in comparison to this. And I'm convinced it was just Pilates, I don't know, getting my body into a very different place. It's low impact. You can do so much with it. Uh, there are hundreds, if not thousands, of variations on exercises. So it's hard to get bored with it. Everything is just different. And uh, you know, I I could do, I could probably go in Charlottesville to four different studios within walking distance of here and have four very different styles of classes and feel very different on my body. I think it's interesting. It's also being used right now. You know, we're seeing a real, you know, we we're talking about niche uh subsets of this. A niche subset's going to be athletic training. Um go look and and see uh what major league teams uh have collateral studios in their facilities. And the answer is it's the majority of them. So we're also recognizing that that missing is a remarkable if you're going to be training insanely on the football field. This is something you probably need. And I'm using it. Look, I I've got a my my son's a sophomore, he's giant, six, four, almost a size 16 shoe. You know, I know it's it's a piece. And you've met me. You're like, how where did he? I wonder that a lot of what he's a kid who uh before he started weightlifting, he started weightlifting about four months ago. He put up 225, by the way, yesterday. So like a proud mom moment. It's like, oh honey, I was like, look at your cookies today. Four months in, I'm really proud of your weightlifting. But we had him doing Pilates for long before this, because from an injury prevention perspective and all of this, and you know, I've seen his mobility, his flexibility, you know, all things that athletes naturally struggle with, and quite frankly, I think are are things that concern me when I start to look from an injury perspective. These are things that Pilates naturally works on. I mean, Joe Pilates started this, started this with veterans, with veterans and actually acting within the war itself, within World War I is what he really started. But if you look at his primary clientele, they were the boxers and dancers in New York City. And uh that's an interesting thing that we're now coming back and people are realizing that that that's gonna be critical. So I think we're gonna see a major opportunity for from an athletic training probably 13 years old to uh through through professional levels. Actually, my studio here in Charlottesville was training a bunch of the Olympic gold medalists from the uh the swim team, the swim teams and and watching them go. You know, they're looking for something different. This is giving them something different.

Awesome. Yeah, you know, it's funny what I've always assumed about Pilates over the years. And I I've done a few classes, mostly just bodyweight stuff, and it was so hard. It was so hard. And I was like, you know, I was really, you know, I was a strong guy, you know, division one athlete, like CrossFitter. And I came to this class mainly because I was injured and I was like, oh my god, I had no idea how hard this was. Let's talk about uh so openings. Um, this is I think something a really interesting topic because you know, you only get one chance at a first impression, right? And that goes for your marketplace as well. And looking back on my gym motor career, I I never really took advantage of of the grand opening opportunities because it's it's a huge opportunity. It's often, you know, it's just people get so excited that we're we're open, right? And then it's like, okay, now what? Right. Uh but you know that you're probably gonna dig into it. There's an art, there's a science, but it's also critically important to the long-term health of the boutique fitness business. So talk us about tell us about openings. What do you know?

So so we know a lot at this point. It's it's been interesting. So around 2022, end of 2022, we had just this way, but people come to us and say, okay, we're running an open studio. And of course, we hadn't heard that for a couple of years. No one wanted to open between that March of 2020 and uh and the end of 2022. And we gathered this whole team together. We'd opened a lot of studios profitably, and we had a really good idea of what that needed to be. And we said, case consumer behavior shifted. We've seen major changes in marketing with some of the Apple updates and things of the like. Like AI is is emerging. How are we, how are we weaving all of these things in to change how we open studios? And we knew uh probably it started looking as early as like 2019, that there was some type of relationship. If I looked in the three-year and the five-year mark after studio was open, I could go back and look at pre-sale to brand openings, roughly 90 days after studio was open, and I could look at the numbers and the revenue they had hit there, and I could see a direct tie of how profitable they were going to be three years and five years down the road. Part of this is probably because if you fail there, there was a decent chance you're gonna close the first year. For those that had survived, it was remarkable that there was some parallel that we were seeing. So we started playing with this and we said, let's build a team. Let's see if we can, let's see if we can get, you know, essentially supercharge what an opening is going to look like. I think the first thing that we learned is that, you know, it is not a one person uh opening a studio is not a one-person job. You know, when you look at the people you're gonna be surrounding yourself with, lawyers, financing experts, real estate experts, people who are gonna be doing uh design layouts. Uh, on the marketing side, you're gonna be looking at digital media buyers, you're looking at social media strategists, you're gonna be looking at marketing uh strategists, you're gonna be looking at software experts to pull up through automations together. You're gonna be looking obviously at sales and operations, recruiting team, what all of this looks like. This is it's no joke to open a studio, especially if it's the first one. But quite frankly, you know, we're spending a lot of time opening people's, you know, 22nd, 23rd, 24th studios right now. Even in most cases, there's still a lot of foundational work that you're doing to make sure you're getting right. First lesson that we've seen, uh, 110% is that is that there is a direct relationship between the wait list that you are going to build and how you nurture that wait list. I think that is a critical thing and the pre-sale sales that you're going to do. Right now, an average studio for us that we're working with, uh, they're opening with anywhere between 125 and 175 members in pre-sale. So that's at day one. Another learning that I think is critical is that the day you open, start your grand opening, it's gonna last 90 days. Whatever you do in pre-sale, unless you blew it out of the water. We just did like a 370-person presale. That is really hard to replicate in uh the next 90 days. But in general, if you're gonna sell 160 memberships uh in pre-sale, you should sell 160 more memberships in the first 90 days. And I think that's a really different mindset to go in on to say, I'm not pushing my marketing for three months of wait list and presale. I'm pushing my marketing for the next six months. I'm gonna drive this ahead. A few interesting other things. You know, when we started investigating with brands because as we were doing this, we dove in deep to a few major brands that were going. We were seeing that uh a lot of people were putting up these big pre-sale numbers. Then we'd go in, you go, gosh, all you sold were month-to-month memberships. And we were seeing with month-to-month membership-driven pre-sales, we were seeing roughly a 50% cancellation rate of those members by month three. And so you'd say I got 200 people in, but you would have an attrition rate at 50%, you know, over that first quarter, which was, I don't want to say almost useless, because obviously great for brand awarist. You still had 100 members in the end, but it was an awful lot of work for very little gain from an accounts receivable perspective, but also from just a growth perspective where it is. I feel like other major learnings we saw all over the place.

Can we talk about that one for a second? Yeah, like, and I think it's not just the numbers on that, but it's it's the mindset of the staff and the owner of like whole, like I got all these people. Yes, half of them are gone. Like, you know, we used to run like challenges. Yeah.

I mean, that was what was alarming to me is like we went in and I'll never forget it. I mean, this one brand, I was like, it it's a it's an amazing brand. And I was looking at this and I said, Have you looked at this number? And they were like, it doesn't really matter. And I was like, but it really does matter. Yeah. Like this is significant, like this should be very concerning that half the people within three months were like, see you later on this brand. Like, and we saw that repeated. Once we saw it once, I was like, find out these numbers from as many brands as possible week one. And it is repeated over and over and over again. It's telling on a couple of things. It's telling that, you know, when you sell someone in pre-sale, there's a really clear journey that they need to go on from a client perspective that's very different than a journey for someone who can walk in your studio the next day. Like we do need headshift, and we've spent a lot of time the last year and a half, like figuring out what do we need to take people through? How do we need to communicate with them? How do we need to get them excited? What do we need to interweave in from a community perspective in those six weeks before their opening that keeps them as excited while they wait for this to happen? Because it's really easy to be like, I bought it and then. Okay. And that doesn't work. Uh, that just doesn't work on where this goes. You're gonna have to have something that's very different. So I think first learning from that is the client journey. There's a pre-opening client journey that exists that has to be executed and it has to be done well. The second thing is uh quite frankly, it can be at your disservice that sometimes when we're seeing these month-to-month memberships, they're almost blasting through their goals of what their team can handle when they open up. So, you know, I they're like, I sold 215 and yet their team really wasn't under schedule, wasn't able to accommodate 215 people. So they got an bad experience from literally week one. And so there's an awareness of like what really is your pre-sale cap so that when you do a soft opening that gets people in for that first week before you're really going in toward to the start of your grand opening process, are they gonna have an extraordinary experience? People talk. I mean, it's just one of these things, like whether you're looking at a Google review, whether you're getting a DM from somebody, whether somebody you run into them, they're telling you that it was average. Like that's not something you can have as a conversation piece in those early days. You gotta be maxing it out from this. And I will say, you know, I think for most people, we're trying to build multiple locations. The vast majority of people we talk to, probably 90%, you're coming at this and saying, hey, look, I really think this is a multi-location deal long term. Obviously, we want to see location number one succeed. We want to see this perform well, but we're making that assumption. And if that's the case, I gotta say, you really want to set this up with as highest accounts receivables as possible. Because if you're gonna be seeking funding, you're gonna, whether it's private, whether it's traditional, you're gonna have to show that that this is something that has a real legs and quite literally a bank, a bank balance that the bank can expect to really warrant that level of funding and support. Sales, another piece that we just don't talk about in boutique fitness. I think the brands that have done sales well have done well. I mean, it's just, you know, I I don't know any other way to say this. You're gonna have to be good at sales and you're gonna have to be dangerous with marketing. Like, there's no two ways around this. And and by the way, that's true of any business. Yeah, just like you can't pick us out of boutique fitness. Like, that's just common sense. Yeah.

And but our industry seems to be very susceptible to that misbelief because we always think that, well, if I just create a great experience and I'm really good at my job and I I'm a good trainer, I'm a good coach. Like it's just it's the word's gonna get out. Everyone's gonna, it's my I'm gonna be so busy, right? It just doesn't, I've seen it time and time again. It's not like that. That's not the real world.

How many people are the best kept secret in town? It's a real common, real comic phrase that I hear in this industry. And I'm sorry, best kept secret is not normally best in business. I mean it's great experience. And and there are a lot of people who are extraordinary experienced, but have are not backing it up with the business that they need. And that sounds harsh. You know, when you say this, it's like, oh my gosh, you know, business is harsh. Again, I don't want to deny that you are you are putting out enormous amounts of of your personal wealth. You are taking on potentially very uh significant debt. You are going to invest an enormous amount of hours. Foundationally, this is a business. Uh, and you want to run it as the very best version of that business as possible. And so, you know, we've spent a lot of time on just, you know, what does great sales training look like? It looks different, quite frankly, than going into like a gold gem 20 years ago. Like boutique fitness should. We have a different clientele, we are in a different price point, you know, we have a different organizational chart structure that we have to accommodate and base on this for, but but you can leave off sales or marketing. And uh, and and yeah, it is remarkable how many people in this business believe that I have some theories in the back of my head where we got here, but it's a mindset we got to change pretty quickly.

Yeah. Yeah. Well, any any other last comments or thoughts on the world of boutique that we don't know that you think we should know?

I really think it's just getting started. You know, it's one of these things that I have a lot of people that come to me and they're like, it's gotta be getting saturated. And we run the numbers all over. It's not now. Are there markets that are saturated? Yeah. A few things that I think, well, one critical thing. Look outside of the biggest markets you wouldn't ordinarily gone into. I am most interested these days for boutique fitness in some tier three and tier four markets because pricing is relatively inelastic in boutique fitness. You know, if you look at the numbers, I could charge the same thing in Fargo, North Dakota, pretty close within eight dollars is what I'm gonna charge in New York City. My rent is going to be roughly six times as much between Fargo and New York City.

Interesting.

The numbers indicate that uh these smaller markets are now educated. We can bank social media, we can bank all of these things. They're educated, they want this. And uh, and quite frankly, their profit margins are gonna be much healthier for most people going in. So I think we're just getting started, and I think we have uh have to start looking and at some very different markets because I think that's uh that's where even greater opportunities are in a line.

Yeah. Yeah. Well, I mean, if uh anyone wants to look at the Flathead Valley here in Montana, we don't have a lot. Oh, I I'd I'd welcome it. I don't really want to do it, but uh call me up. We have 110,000 people here. I love it. And uh we love the outdoors. So Lisi, always a pleasure. And you and I are gonna see each other in person at the Athletech event. I think this will come out right before that. Yeah, yeah. We're doing a panel with Troy Taylor of Tonal. So you could talk about that. That's something we didn't talk about here, but you know, very unique uh, you know, intersection of connected fitness and the boutique experience and what you guys in New York, the tonal tonal training lab, right? Yeah.

Tonal training lab, six-week pop-up that we built with tonal was uh, I have to say it's one of those things that I one of the coolest projects sold out, great example of how we can bring tech in tech into a a very uh a very physical environment and offer people an experience. Once again, an experience that I think is is extraordinary.

Yeah, awesome. And Lisey, if people want to get a hold of you, what's what's the best place?

Absolutely. Get to us at studiogrow, ww.studio grow.co. It's support at studiogrow.co is gonna is gonna go on over to routine and find me on LinkedIn. I am shameless. I I sort of hate Instagram. I'm like probably the only millennial that's ever gonna say that. I'm okay with that. But I love LinkedIn, so come find me on LinkedIn, send me a message. Really look forward to engaging and talking, seeing what's out there in the world.

Awesome. Well, Lisa, thank you for doing this. Uh, I always have uh have a lot of respect for you and what you guys do at Studio Grow. Uh the content you put out is always excellent, and uh it's always a pleasure. You bring a ton of value here. So, ladies and gentlemen, Lisa Keeger. Hey, wait, don't leave yet. This is your host, Eric Malzone, and I hope you enjoyed this episode of Future of Minute. If you did, I'm gonna ask you to do three simple things. It takes under five minutes and it goes such a long way. We really appreciate it. Number one, please subscribe to our show wherever you listen to it, iTunes, Spotify, Castbox, whatever it may be. Number two, please leave us a favorable review. Number three, share. Put it on social media, talk about it to your friends, send it in a text message, whatever it may be. Please share this episode because we put a lot of work into it. We want to make sure that as many people are getting value out of it as possible. Lastly, if you'd like to learn more, get in touch with me, simply go to the futureoffitness.co. You can subscribe to our newsletter there, or you can simply get in touch with me as I love to hear from our listeners. So thank you so much. This is Eric Malzone, and this is the future of fitness. Have a great day.