Stu Brauer - Gym Real Estate: Everything You Didn't Know

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[00:02:05] [SPEAKER_01]: All right, we are live.

[00:02:07] [SPEAKER_01]: Stu Brower, welcome back to the future of fitness, my friend.

[00:02:09] [SPEAKER_01]: What's up, Rob?

[00:02:10] [SPEAKER_01]: Thank you for having me out again.

[00:02:11] [SPEAKER_01]: Yes, and dear sweet listener, I promise to you one thing.

[00:02:15] [SPEAKER_01]: Over the next 45 minutes, you will not be bored.

[00:02:17] [SPEAKER_01]: Stu is one of the more entertaining content creators our industry has to offer

[00:02:21] [SPEAKER_01]: and makes me laugh about every 10 minutes with them.

[00:02:24] [SPEAKER_01]: So it's always fun to have you on, Stu.

[00:02:26] [SPEAKER_01]: And you got a lot boiling, dude.

[00:02:27] [SPEAKER_01]: A lot of cool stuff going.

[00:02:29] [SPEAKER_01]: You're just telling me all about Jim Real Estate Company, the segmentation process

[00:02:32] [SPEAKER_01]: and what you're learning through that and the value you're offering.

[00:02:34] [SPEAKER_01]: You've been offering value to as you call microgim owners for what, man?

[00:02:40] [SPEAKER_01]: A decade or more now?

[00:02:42] [SPEAKER_01]: Like how long have you been doing this?

[00:02:43] [SPEAKER_00]: I think I hit the record button in the upload button on the same day

[00:02:48] [SPEAKER_00]: in 2014, going into 2050.

[00:02:50] [SPEAKER_00]: That's a big thing though for everyone listening to makes content weak.

[00:02:53] [SPEAKER_00]: A lot of times we hit that record button and man, it takes a lot of balls

[00:02:56] [SPEAKER_00]: then to hit the upload button.

[00:02:58] [SPEAKER_00]: Like shit, what is everyone going to say?

[00:03:00] [SPEAKER_00]: So I hit them both in the same day early or late 2014, 2015.

[00:03:05] [SPEAKER_00]: And then that was all the business consulting, which we still do.

[00:03:07] [SPEAKER_00]: But my own trajectory using my gym to allow me to purchase

[00:03:11] [SPEAKER_00]: commercial real estate and that commercial real estate gave me the

[00:03:14] [SPEAKER_00]: opportunity to quote unquote retire from gym ownership and lease out my building.

[00:03:18] [SPEAKER_00]: You know, creating this revenue stream that was far more passive

[00:03:22] [SPEAKER_00]: than owning a gym.

[00:03:23] [SPEAKER_00]: And you realize I'm not that smart.

[00:03:25] [SPEAKER_00]: I'm not that special.

[00:03:25] [SPEAKER_00]: If I can leverage my gym to utilize SBA loans to buy commercial real

[00:03:30] [SPEAKER_00]: estate, so can others.

[00:03:32] [SPEAKER_00]: And so I added this extension, the Jim Real estate company

[00:03:35] [SPEAKER_00]: to our the consulting services I offer.

[00:03:37] [SPEAKER_00]: I have my broker's license here in North Carolina, but we work

[00:03:40] [SPEAKER_00]: everywhere in the United States.

[00:03:42] [SPEAKER_00]: But we don't come in as a broker.

[00:03:43] [SPEAKER_00]: We come as a site suitability consultant.

[00:03:46] [SPEAKER_00]: We help gym owners know where to go and how to grow.

[00:03:49] [SPEAKER_00]: So when they work with us, they're not only getting the

[00:03:53] [SPEAKER_00]: here's the type of site you're looking for.

[00:03:55] [SPEAKER_00]: Here's where they're at.

[00:03:56] [SPEAKER_00]: Let's help you negotiate.

[00:03:57] [SPEAKER_00]: Let's do all the things we do a whole suite of services.

[00:04:00] [SPEAKER_00]: And then we also provide business consulting on the back end as well.

[00:04:03] [SPEAKER_00]: Smart, smart.

[00:04:04] [SPEAKER_01]: And you are going to ask this question, kind of identify it

[00:04:06] [SPEAKER_01]: because I want to get your take on like the last year and kind of

[00:04:08] [SPEAKER_01]: the headwinds that people are talking about with like this sector

[00:04:10] [SPEAKER_01]: of the industry.

[00:04:12] [SPEAKER_01]: But you primarily work with like CrossFit style gyms, small like boutique

[00:04:16] [SPEAKER_01]: franchise, like who are your core clientele?

[00:04:20] [SPEAKER_00]: My core clientele in the beginning was generally mom and pop

[00:04:23] [SPEAKER_00]: independently on what I refer to as the micro gym.

[00:04:25] [SPEAKER_00]: And that terminology mainly just came from, you know, dodge ball

[00:04:28] [SPEAKER_00]: and the global gym was the big health club.

[00:04:30] [SPEAKER_00]: And when I got into the CrossFit game very similar to when you did

[00:04:32] [SPEAKER_00]: back in like 06, 7, 8, 9, it was really global gyms.

[00:04:36] [SPEAKER_00]: And then us and I just started using the term this micro gym,

[00:04:40] [SPEAKER_00]: which is just I use it as group fitness.

[00:04:42] [SPEAKER_00]: It's what we call boutique group fitness.

[00:04:44] [SPEAKER_00]: A lot of independently owned shops, emerging franchises.

[00:04:47] [SPEAKER_00]: So say less than 30 locations, 20 locations, something like that.

[00:04:51] [SPEAKER_00]: And a lot of concepts, you know, first off one of ones, I've got

[00:04:56] [SPEAKER_00]: to check in an idea and I want to make this thing come to life.

[00:04:59] [SPEAKER_01]: And how, you know, I've talked to some people who work specifically

[00:05:02] [SPEAKER_01]: in like franchises and, you know, in the, when I think boutique,

[00:05:07] [SPEAKER_01]: I kind of think of like New York, Manhattan, like those

[00:05:10] [SPEAKER_01]: style of like, you know, kind of fancy boutiques.

[00:05:12] [SPEAKER_01]: But obviously there's a lot of strength and conditioning gyms and things like that.

[00:05:14] [SPEAKER_01]: But the segment of the market that you work with, how's it done over the last year?

[00:05:18] [SPEAKER_01]: And when people talk about headwinds in the micro gym segment,

[00:05:22] [SPEAKER_01]: like is that a real thing or how are they feeling pain?

[00:05:25] [SPEAKER_01]: Are they feeling good as confidence building? Like where we at?

[00:05:27] [SPEAKER_00]: Yeah, you know, COVID, I think cleaned out that bottom 20% of the pool

[00:05:32] [SPEAKER_00]: that was hanging on anyway.

[00:05:33] [SPEAKER_00]: And just a few, you know, a couple of rough, rough months.

[00:05:36] [SPEAKER_00]: And again, you know, there was a great excuse to also fold.

[00:05:39] [SPEAKER_00]: I think a lot of small business owners hang on longer than they actually logically

[00:05:44] [SPEAKER_00]: should or more than their spouse would want them to out of ego, right?

[00:05:48] [SPEAKER_00]: I don't want to be a failure.

[00:05:49] [SPEAKER_00]: And I think COVID gave a lot of people the opportunity to just bow out gracefully.

[00:05:54] [SPEAKER_00]: But I didn't really think it was that much of a downtick.

[00:05:56] [SPEAKER_00]: I think everything we see now shows that utilization rates are up,

[00:06:01] [SPEAKER_00]: attendance is up, fitness is in, whether you're considering fitness,

[00:06:04] [SPEAKER_00]: you know, the wellness recovery sauna, cold plunge, recovery boots

[00:06:08] [SPEAKER_00]: section, the sector or your group fitness and, you know, boutique.

[00:06:13] [SPEAKER_00]: The boutique thing I think mainly popped like when orange theory hit the retail

[00:06:17] [SPEAKER_00]: space and we started seeing really nice retail locations become the status

[00:06:21] [SPEAKER_00]: quo for fitness versus like in the CrossFit day, everyone doesn't really

[00:06:25] [SPEAKER_00]: realize a lot of my interest in commercial real estate.

[00:06:28] [SPEAKER_00]: The reason CrossFit gyms exploded was right after the crash of 2008.

[00:06:34] [SPEAKER_00]: Yeah.

[00:06:34] [SPEAKER_00]: And industrial warehouses are what we call flex space, little office up front,

[00:06:39] [SPEAKER_00]: warehouse in the back.

[00:06:40] [SPEAKER_00]: Most of those business models were completely underwater and really screwed.

[00:06:46] [SPEAKER_00]: So landlords, they never anticipated of when they built that building,

[00:06:50] [SPEAKER_00]: that flex space warehouse.

[00:06:51] [SPEAKER_00]: They never thought in their wildest dreams some crazy do with tattoos

[00:06:55] [SPEAKER_00]: would want to come rent his space with no heat, no air conditioning,

[00:06:58] [SPEAKER_00]: hang ropes from it and do these crazy fucking workouts.

[00:07:01] [SPEAKER_00]: Never.

[00:07:03] [SPEAKER_00]: But beggars can't be choosers and in the post of the 2008 crash, they're like,

[00:07:08] [SPEAKER_00]: sure, dude, here I'll give you a six months, a year free if you sign a,

[00:07:11] [SPEAKER_00]: you know, five year term.

[00:07:13] [SPEAKER_00]: And that's really the birth of this industrial thing.

[00:07:16] [SPEAKER_00]: Greg Glass, from the founder of CrossFit, they were always advocated

[00:07:18] [SPEAKER_00]: for cheaper rent, which was industrial.

[00:07:20] [SPEAKER_00]: But now because of cannabis, micro breweries and just the

[00:07:24] [SPEAKER_00]: chic industrial, the, you know, lead pipe and reclaimed wood pellets

[00:07:29] [SPEAKER_00]: is like an invoke thing.

[00:07:30] [SPEAKER_00]: Industrial is pretty damn expensive as well in most tier one and tier two markets.

[00:07:36] [SPEAKER_00]: So anyway, this boutique thing, everyone thinks of like the retail,

[00:07:39] [SPEAKER_00]: the pretty looking thing.

[00:07:40] [SPEAKER_00]: That's when I say micro gym.

[00:07:41] [SPEAKER_00]: I'm referring to either of them regardless of what asset class

[00:07:44] [SPEAKER_00]: of commercial real estate you chose.

[00:07:46] [SPEAKER_01]: Yeah.

[00:07:46] [SPEAKER_01]: Yeah, that's awesome, man.

[00:07:48] [SPEAKER_01]: Really brought me back to like, I think our first rent in our gym was

[00:07:51] [SPEAKER_01]: we had a 1000 square foot spot and it cost us like $900.

[00:07:55] [SPEAKER_01]: And if we had held into that, like, and we grew into the parking lot,

[00:07:59] [SPEAKER_01]: right? Like we built those basically built monkey bars in the back

[00:08:02] [SPEAKER_01]: so we could swing from them like children.

[00:08:04] [SPEAKER_01]: Yeah.

[00:08:05] [SPEAKER_01]: And I wish we kept it because that was actually now, oh God,

[00:08:08] [SPEAKER_01]: it's like a it's like the chicest spot in Santa Barbara.

[00:08:11] [SPEAKER_01]: Like it's where all the wineries are now.

[00:08:14] [SPEAKER_01]: Oh, the funk zone is called the funk zone.

[00:08:16] [SPEAKER_01]: It was called the funk zone back then for a reason.

[00:08:18] [SPEAKER_01]: Like we would do our four meter run and there would be

[00:08:20] [SPEAKER_01]: there was literally a strip club, a fish dryery,

[00:08:23] [SPEAKER_01]: a like indoor spa, right?

[00:08:27] [SPEAKER_01]: I'm giving people air quotes.

[00:08:29] [SPEAKER_01]: Yeah, yeah, yeah.

[00:08:29] [SPEAKER_01]: And there adult store.

[00:08:31] [SPEAKER_00]: Robert Kraft spot.

[00:08:32] [SPEAKER_00]: Yeah.

[00:08:33] [SPEAKER_00]: Yeah.

[00:08:35] [SPEAKER_01]: Yes.

[00:08:35] [SPEAKER_01]: So anyway, I digress.

[00:08:37] [SPEAKER_01]: So let's talk about gym real estate because I think it's really interesting.

[00:08:39] [SPEAKER_01]: And I was thinking about this before we started talking is like,

[00:08:42] [SPEAKER_01]: I think as you build sophistication in the business owner or the gym owner,

[00:08:46] [SPEAKER_01]: you start to pay more and more attention to the power of real estate

[00:08:49] [SPEAKER_01]: and how critical it is to not even one location, but scaling many.

[00:08:53] [SPEAKER_01]: And I mean, as you're if people are fitness enthusiasts or maybe

[00:08:57] [SPEAKER_01]: your trainers, they get into gym ownership.

[00:08:59] [SPEAKER_01]: They're probably like, that's a cool location.

[00:09:01] [SPEAKER_01]: I'll take it.

[00:09:02] [SPEAKER_01]: Right.

[00:09:02] [SPEAKER_01]: But as you get more sophisticated as you're about to teach us,

[00:09:05] [SPEAKER_01]: like there's a lot of factors in choosing the real estate, how to research it,

[00:09:09] [SPEAKER_01]: how to leverage it and the stuff you were telling me about segmentation

[00:09:12] [SPEAKER_01]: and geo segmentation, whatever you want to call it.

[00:09:14] [SPEAKER_01]: Super fascinating, man.

[00:09:16] [SPEAKER_01]: So give us like an, give us an overview of like who tends

[00:09:20] [SPEAKER_01]: to seek your help with this type of work and what is the value in what you do?

[00:09:27] [SPEAKER_00]: Yeah.

[00:09:27] [SPEAKER_00]: So we essentially help gym owners lease and buy buildings and 97% of our work are leases.

[00:09:34] [SPEAKER_00]: My goal is that over a long enough period of time, that portion of the gym

[00:09:38] [SPEAKER_00]: owner population that kind of is in a financial position to purchase

[00:09:42] [SPEAKER_00]: commercial real estate increases.

[00:09:43] [SPEAKER_00]: That would be my ultimate goal.

[00:09:45] [SPEAKER_00]: I realized the benefit of it.

[00:09:46] [SPEAKER_00]: And so that's our ultimate goal.

[00:09:49] [SPEAKER_00]: But mainly we're dealing with leases at the current time.

[00:09:52] [SPEAKER_00]: Now, when we go ahead and we think of the small business owner and they're selecting

[00:09:55] [SPEAKER_00]: a new commercial real estate location, it could be location 11, location

[00:09:59] [SPEAKER_00]: one doesn't matter.

[00:10:00] [SPEAKER_00]: We generally think of this and this in anyone listening who is a small

[00:10:04] [SPEAKER_00]: business owner can probably relate if you're brick and mortar.

[00:10:07] [SPEAKER_00]: You're like, okay, I know what I can afford.

[00:10:09] [SPEAKER_00]: I know which type of asset class I want, industrial office, you know,

[00:10:14] [SPEAKER_00]: retail and you know, area I think over here is going to be good because

[00:10:18] [SPEAKER_00]: there's a whole foods around the corner and rich people love whole foods.

[00:10:21] [SPEAKER_00]: So if I set up shop there, I'm fucking set.

[00:10:24] [SPEAKER_00]: And that's kind of like the poor man's way of doing it.

[00:10:27] [SPEAKER_00]: That's how I did it in the beginning.

[00:10:29] [SPEAKER_00]: And that's how a lot of people like, oh, Stu, I heard there's

[00:10:32] [SPEAKER_00]: going to be apartments over here.

[00:10:34] [SPEAKER_00]: So I mean, once those get built, I'm pretty much a tritrillionaire

[00:10:38] [SPEAKER_00]: like I'm going to be set.

[00:10:40] [SPEAKER_00]: And we have this very, and there's no other word for it.

[00:10:43] [SPEAKER_00]: There's just a very ignorant viewpoint on commercial real estate, how long

[00:10:48] [SPEAKER_00]: areas take to develop and where you should go.

[00:10:52] [SPEAKER_00]: And then I got to meet and see through the back at the back end of somewhat,

[00:10:56] [SPEAKER_00]: you know, our mutual friend, Brandon Cullen, who has been a great

[00:11:01] [SPEAKER_00]: mentor in this and showing me at the franchise level.

[00:11:04] [SPEAKER_00]: Here's what site selection looks like.

[00:11:06] [SPEAKER_00]: I've got to talk with Orange Theory, you know, multi-unit franchise or

[00:11:11] [SPEAKER_00]: franchisees, what unit selection looks like when they're picking a location

[00:11:15] [SPEAKER_00]: and it looked nothing like what a small business owners were doing.

[00:11:19] [SPEAKER_00]: They were utilizing tech stacks and software and licenses that did

[00:11:24] [SPEAKER_00]: some really cool things, borderline creepy, borderline creepy.

[00:11:28] [SPEAKER_00]: And so I said, well, why isn't that happening for the small business

[00:11:31] [SPEAKER_00]: owners? So I research it.

[00:11:32] [SPEAKER_00]: It's silly expensive.

[00:11:34] [SPEAKER_00]: I mean, some of these licenses can be $60,000 plus a year.

[00:11:38] [SPEAKER_00]: So it doesn't make sense for a local broker who's got a gym, who maybe

[00:11:42] [SPEAKER_00]: one time gym, mom and pop gym, who wants 3,400 square feet on a five-year lease.

[00:11:48] [SPEAKER_00]: Do you know how much that broker is going to make in commission?

[00:11:51] [SPEAKER_00]: Nothing for a career commercial real estate agent.

[00:11:54] [SPEAKER_00]: That's not a big commission check for them.

[00:11:56] [SPEAKER_00]: So why would you spend all these resources on that type of person?

[00:11:59] [SPEAKER_00]: Now give me an Orange Theory that's going to open 100 locations a year.

[00:12:02] [SPEAKER_00]: Deal. Give me a Regis, an office cohort.

[00:12:07] [SPEAKER_00]: You know, space is going to open up offices all over the country.

[00:12:09] [SPEAKER_00]: Deal. But the small business owner never got this.

[00:12:12] [SPEAKER_00]: Once I realized, oh my God, this is what every Arby's, every Chick-fil-A,

[00:12:16] [SPEAKER_00]: every Orange Theory, every metabolic, every massage envy is doing

[00:12:19] [SPEAKER_00]: to find their locations.

[00:12:21] [SPEAKER_00]: I was like, oh, how do I bring this to the small business owner?

[00:12:24] [SPEAKER_00]: So I spent 18 months testing out different licensed products,

[00:12:30] [SPEAKER_00]: spending a lot of money, finding the ones I like that did

[00:12:32] [SPEAKER_00]: and like, landed on a tech stack that works.

[00:12:35] [SPEAKER_00]: And now we're able to offer some of these services to the small business

[00:12:38] [SPEAKER_00]: owner who would not otherwise probably be provided the opportunities

[00:12:42] [SPEAKER_00]: even if they went direct to any of these companies.

[00:12:44] [SPEAKER_00]: They would say, no, you're not large enough.

[00:12:47] [SPEAKER_00]: So now hopefully we kind of democratize that a little bit.

[00:12:50] [SPEAKER_01]: Yeah. Awesome, man.

[00:12:51] [SPEAKER_01]: Well, let's just say hypothetically, I was able to talk my wife

[00:12:55] [SPEAKER_01]: into the idea of me opening another gym.

[00:12:58] [SPEAKER_01]: Right? Sure. Not going to happen anytime soon.

[00:13:00] [SPEAKER_01]: But if I was and I was like, all right, well, I'm going to start

[00:13:03] [SPEAKER_01]: with my concept.

[00:13:05] [SPEAKER_01]: And then after that, once I get my concept down, I'm going to talk to Stu.

[00:13:08] [SPEAKER_01]: So what's that process?

[00:13:09] [SPEAKER_01]: Like how does that work?

[00:13:10] [SPEAKER_01]: You know, kind of bring me through start to finish.

[00:13:13] [SPEAKER_00]: Yeah. We just hop on a discovery call and I get to get a better

[00:13:16] [SPEAKER_00]: idea as to what you're looking for in a real estate project.

[00:13:19] [SPEAKER_00]: And the nice thing about a broker, if anyone's used a local broker,

[00:13:23] [SPEAKER_00]: you don't pay them anything.

[00:13:24] [SPEAKER_00]: The landlord or the seller, if you're buying real estate,

[00:13:28] [SPEAKER_00]: is going to commission your broker.

[00:13:29] [SPEAKER_00]: We work in the exact same capacity.

[00:13:31] [SPEAKER_00]: Our clients don't have to pay.

[00:13:33] [SPEAKER_00]: You want to talk about a great marketing hitch?

[00:13:35] [SPEAKER_00]: I get to do all this entire suite of services for you, Mr.

[00:13:38] [SPEAKER_00]: Jim O'Hour, and you don't have to pay me the landlord or the seller will.

[00:13:42] [SPEAKER_00]: And so it's really nice, but I also had to do more than a local broker.

[00:13:46] [SPEAKER_00]: A, for legal reasons, I cannot perform brokerage services in states.

[00:13:49] [SPEAKER_00]: I don't have a broker's license.

[00:13:51] [SPEAKER_00]: So we've created a complete suite of services that is beyond

[00:13:54] [SPEAKER_00]: anything a broker could offer.

[00:13:56] [SPEAKER_00]: So one of the first things.

[00:13:57] [SPEAKER_00]: So let's say you signed up.

[00:13:58] [SPEAKER_00]: Let's say you had an existing location, you had location one.

[00:14:01] [SPEAKER_00]: We could do the segmentation report.

[00:14:02] [SPEAKER_00]: So we go ahead, have you download a CSV file of all your customer data,

[00:14:06] [SPEAKER_00]: past customers, current customers.

[00:14:08] [SPEAKER_00]: And then I can upload it into a database.

[00:14:11] [SPEAKER_00]: That database takes those individuals.

[00:14:13] [SPEAKER_00]: And you guys do realize every Apple Pay transaction,

[00:14:16] [SPEAKER_00]: every mortgage payment, every debit card payment,

[00:14:19] [SPEAKER_00]: everything you make is traced.

[00:14:21] [SPEAKER_00]: Everything you're buying on shop.

[00:14:22] [SPEAKER_00]: They know more about you as a consumer than you would absolutely believe.

[00:14:28] [SPEAKER_00]: There are three companies, everyone recognizes them,

[00:14:30] [SPEAKER_00]: Experian, TransUnion and Equifax.

[00:14:33] [SPEAKER_00]: What are those the three credit bureaus?

[00:14:35] [SPEAKER_00]: While yes, they provide credit scores.

[00:14:37] [SPEAKER_00]: Where do you think they get that data from?

[00:14:39] [SPEAKER_00]: So Experian for example is one.

[00:14:41] [SPEAKER_00]: Anyone can do this right now.

[00:14:42] [SPEAKER_00]: They can go and Google Experian Mosaic, M-O-S-A-I-C.

[00:14:47] [SPEAKER_00]: An Experian Mosaic is their 72 profile database.

[00:14:51] [SPEAKER_00]: They have created 72 different consumer buying personas.

[00:14:55] [SPEAKER_00]: No way.

[00:14:57] [SPEAKER_00]: And you, everyone listening, you were already categorized in one of those.

[00:15:01] [SPEAKER_00]: Your name is somewhere in the database

[00:15:03] [SPEAKER_00]: and you've already been categorized based on where you live,

[00:15:05] [SPEAKER_00]: how much you make, how much you spend, where you spend it.

[00:15:09] [SPEAKER_00]: All of that.

[00:15:10] [SPEAKER_00]: So I can take a CSV file from any business,

[00:15:13] [SPEAKER_00]: run into the database and I could say this is the consumer profile.

[00:15:17] [SPEAKER_00]: It'll show everything from demographics, household income,

[00:15:21] [SPEAKER_00]: geographics, location.

[00:15:23] [SPEAKER_00]: It'll even give psychographics.

[00:15:25] [SPEAKER_00]: Which ways are they likely to vote?

[00:15:26] [SPEAKER_00]: Are they more conservative and more liberal?

[00:15:28] [SPEAKER_00]: Buying behaviors?

[00:15:30] [SPEAKER_00]: Do they buy from these brands or these brands?

[00:15:32] [SPEAKER_00]: Right?

[00:15:32] [SPEAKER_00]: Are they more likely to be kind of a latte's person for seven bucks a pop

[00:15:35] [SPEAKER_00]: or are they going to be, you know, dollar coffee at the gas station?

[00:15:39] [SPEAKER_00]: It gives an entire beautiful marketing profile.

[00:15:42] [SPEAKER_00]: We're able to then use that in Facebook ads and things like that.

[00:15:44] [SPEAKER_00]: But really the cool part about it is we're able to go and scan it

[00:15:47] [SPEAKER_00]: and show you where in the country that person can be found

[00:15:52] [SPEAKER_00]: in any market, anywhere in the United States.

[00:15:56] [SPEAKER_00]: So like one of the cool things, am I able to steal a screen share

[00:15:59] [SPEAKER_00]: just to show you for this?

[00:16:01] [SPEAKER_00]: Yeah, let's go for it.

[00:16:02] [SPEAKER_01]: Let's do it.

[00:16:03] [SPEAKER_00]: All right, check this out.

[00:16:04] [SPEAKER_00]: So Eric's taking a look at this right now.

[00:16:06] [SPEAKER_00]: So this is one of the softwares we use and they have all these families,

[00:16:10] [SPEAKER_00]: these giant segments and they have cute little names like this one's called

[00:16:14] [SPEAKER_00]: wealthy suburban families.

[00:16:16] [SPEAKER_00]: So I can click on this segment and let's say, Eric, your gym

[00:16:19] [SPEAKER_00]: populated that this was one of the key segments of your customers

[00:16:24] [SPEAKER_00]: after I ran it through the database.

[00:16:26] [SPEAKER_00]: It'll give me who they buy from retail in person, who they buy online

[00:16:31] [SPEAKER_00]: from Instagram accounts, what do they follow?

[00:16:33] [SPEAKER_00]: I can even get into something so cool and I think you'll love this.

[00:16:37] [SPEAKER_00]: You know, Nielsen is the big marketing confirm.

[00:16:39] [SPEAKER_00]: Yeah.

[00:16:39] [SPEAKER_00]: I can show you which video ads and campaigns nationally that have been

[00:16:44] [SPEAKER_00]: run by big brands have scored best with your particular segment.

[00:16:48] [SPEAKER_00]: And then you could try to replicate the feelings or the aura of that video

[00:16:52] [SPEAKER_00]: as a small business owner.

[00:16:53] [SPEAKER_00]: But here's the cool part for me on the real estate side.

[00:16:56] [SPEAKER_00]: Stu, I'm thinking of maybe open up a gym in Ohio.

[00:16:59] [SPEAKER_00]: Well, oh, well, what about Cincinnati, Eric?

[00:17:02] [SPEAKER_00]: I've got a couple.

[00:17:03] [SPEAKER_00]: Cincinnati lights up pretty decently and I could take you

[00:17:06] [SPEAKER_00]: to the different subsections and submarkets of Cincinnati and show you

[00:17:10] [SPEAKER_00]: where those individuals are highly concentrated.

[00:17:15] [SPEAKER_00]: So, and again, this is something that generally you got to be a very big

[00:17:19] [SPEAKER_00]: time customer national chain to access all this.

[00:17:22] [SPEAKER_00]: And I took the gamble of I think I can accommodate the small business

[00:17:25] [SPEAKER_00]: markets on this thing, especially in the fitness industry, because

[00:17:28] [SPEAKER_00]: that's what I like.

[00:17:29] [SPEAKER_00]: And it's worked out really, really well.

[00:17:31] [SPEAKER_00]: It's been very, very cool.

[00:17:33] [SPEAKER_00]: It makes the job finding the real estate a lot easier because now I can,

[00:17:38] [SPEAKER_00]: you know, because all of a generally, I think this area is great.

[00:17:40] [SPEAKER_00]: And then but it's anecdotal.

[00:17:42] [SPEAKER_00]: They're saying that because of a thing they read in the paper, you know,

[00:17:45] [SPEAKER_00]: or some news they heard of a, you know, something's opening up there.

[00:17:49] [SPEAKER_00]: And then we show them the profile like this is the actual data

[00:17:51] [SPEAKER_00]: because most of us on it's been can you think of a more serious

[00:17:55] [SPEAKER_00]: financial commitment that any small business owner has than their commercial lease?

[00:17:59] [SPEAKER_00]: I can't know.

[00:18:00] [SPEAKER_00]: They're generally have a personal guarantee tied to it.

[00:18:03] [SPEAKER_00]: They're locked in for a period of time.

[00:18:05] [SPEAKER_00]: It's not something you want to make off anecdotal data.

[00:18:09] [SPEAKER_00]: You want to make it off legit data.

[00:18:10] [SPEAKER_00]: When I realize this is why Orange Fury will deliberate over a location

[00:18:14] [SPEAKER_00]: for 16 months, but that's also one of the key reasons they are so

[00:18:17] [SPEAKER_00]: successful at opening up with the strong presale.

[00:18:20] [SPEAKER_00]: Yes, they've got a good marketing arm.

[00:18:21] [SPEAKER_00]: Yes, they have a good sales arm.

[00:18:22] [SPEAKER_00]: Brand presence nationally because they pick the right spot.

[00:18:26] [SPEAKER_00]: And you know, a location is a lot of things.

[00:18:29] [SPEAKER_00]: You can have a horrible location with a great operator and do well.

[00:18:33] [SPEAKER_00]: But I'll tell you this, and I think most of my friends in the franchise

[00:18:36] [SPEAKER_00]: will agree, you can have a crap, crap operator in a great location.

[00:18:43] [SPEAKER_00]: And that thing still does well because it's just where the core

[00:18:47] [SPEAKER_00]: customer for that company eats, works, plays, sleeps,

[00:18:51] [SPEAKER_00]: shop does all the things.

[00:18:53] [SPEAKER_00]: So it's interesting.

[00:18:55] [SPEAKER_00]: It's it's been a lot of fun and it just some cool tech.

[00:18:58] [SPEAKER_00]: Just a different level of service that I'm able to bring to someone who's

[00:19:02] [SPEAKER_00]: a small to medium sized business owner in the fitness industry,

[00:19:04] [SPEAKER_00]: looking to lease or buy a building.

[00:19:06] [SPEAKER_01]: Yeah, man.

[00:19:07] [SPEAKER_01]: It's really impressive and people want to see everything that Stu just shared.

[00:19:10] [SPEAKER_01]: You can go that we do have a YouTube channel.

[00:19:12] [SPEAKER_01]: A lot of people, most people don't know that we do, but it's out there.

[00:19:14] [SPEAKER_01]: So you can check that out.

[00:19:16] [SPEAKER_01]: It seems to me too as I'm listening to you roll through this, like it

[00:19:19] [SPEAKER_01]: almost makes sense to get you involved as early as possible.

[00:19:23] [SPEAKER_01]: Like before maybe like if you have a little bit of variety in the type

[00:19:28] [SPEAKER_01]: of service that you can offer, the type of fitness that you can deliver to people.

[00:19:33] [SPEAKER_01]: Like maybe talking to like, Hey, I want to stay in, you know, let's give an

[00:19:36] [SPEAKER_01]: example where I was.

[00:19:37] [SPEAKER_01]: I want to stay in the Santa Barbara County, right?

[00:19:39] [SPEAKER_01]: Or Ventura County, like, you know, in that central coast area.

[00:19:41] [SPEAKER_01]: But I want to deliver, you know, Jiu-Jitsu, right?

[00:19:45] [SPEAKER_01]: As a as a particular service offering, right?

[00:19:47] [SPEAKER_01]: Or type of gym and I have that bandwidth.

[00:19:50] [SPEAKER_01]: Like you could help me choose up and down the coast or maybe say, Hey, you know,

[00:19:53] [SPEAKER_01]: maybe you want to do something a little bit more kid oriented and you can

[00:19:58] [SPEAKER_01]: be really successful here.

[00:19:59] [SPEAKER_01]: See what I'm talking about?

[00:20:00] [SPEAKER_01]: Like getting you involved early in the strategy of the development

[00:20:03] [SPEAKER_01]: of what you're doing before you actually start stroking check seems

[00:20:06] [SPEAKER_00]: to make a lot of sense.

[00:20:08] [SPEAKER_00]: Cannibalization analysis is something we get brought on to do regularly.

[00:20:11] [SPEAKER_00]: So cannibalization factor is for anyone listening.

[00:20:14] [SPEAKER_00]: So your business, every business has a trade area.

[00:20:16] [SPEAKER_00]: So I can put in any address in the United States, a brick and mortar location.

[00:20:20] [SPEAKER_00]: I can show the trade area, the trade area for that particular business,

[00:20:23] [SPEAKER_00]: that address, that suite, where the customers live and travel from.

[00:20:28] [SPEAKER_00]: Now let's say you're location one.

[00:20:29] [SPEAKER_00]: Now you want a location two, but you're always concerned.

[00:20:31] [SPEAKER_00]: Is it too close to each other?

[00:20:32] [SPEAKER_00]: Is it too far away?

[00:20:34] [SPEAKER_00]: So cannibalization is where two locations, their unique trade areas overlap

[00:20:39] [SPEAKER_00]: to such a degree you actually cannibalize your sales.

[00:20:42] [SPEAKER_00]: The reason someone opens a second location is to scale up, right?

[00:20:46] [SPEAKER_00]: They're hopefully to get the second location to where the first one is.

[00:20:48] [SPEAKER_00]: But you'll see gyms open up two locations and then something weird happens.

[00:20:54] [SPEAKER_00]: They neither of them are the one that started, darts falling down.

[00:20:58] [SPEAKER_00]: And the one that they open never achieves what the first one did.

[00:21:01] [SPEAKER_00]: One of the reasons could be they're just cannibalizing each other.

[00:21:04] [SPEAKER_00]: They open up on the wrong sides of town.

[00:21:07] [SPEAKER_00]: And now like literally the software we use will show, you know,

[00:21:10] [SPEAKER_00]: so let's say I'm working with the gym, we have location one.

[00:21:12] [SPEAKER_00]: And I've got, hey, here's five.

[00:21:14] [SPEAKER_00]: Five doleens we found you can possibly move into.

[00:21:16] [SPEAKER_00]: We map all five of those out and we can show the cannibalization factor at each one.

[00:21:20] [SPEAKER_00]: Which one is going to be closest to your core customer that we found

[00:21:24] [SPEAKER_00]: the segmentation analysis?

[00:21:26] [SPEAKER_00]: And then number two, where is too far versus where is just too close?

[00:21:31] [SPEAKER_00]: And then how do we find that middle ground in between?

[00:21:33] [SPEAKER_01]: Yeah, it's fascinating.

[00:21:34] [SPEAKER_01]: Now, I think you may have alluded to it already, but I'm going to ask

[00:21:37] [SPEAKER_01]: the question more directly.

[00:21:38] [SPEAKER_01]: What is one of the biggest and most reoccurring mistake that you see

[00:21:43] [SPEAKER_01]: gym owners make when it comes to real estate?

[00:21:46] [SPEAKER_00]: Undercapitalization and thinking that because your, your fiance's dad is a

[00:21:52] [SPEAKER_00]: residential contractor that your build out's not going to cost it.

[00:21:56] [SPEAKER_00]: Like the one day it's nice about what we do is so again, we, because I've

[00:22:01] [SPEAKER_00]: also, I went through this personally, which took my interest in the project

[00:22:04] [SPEAKER_00]: management on the commercial construction side and all that.

[00:22:07] [SPEAKER_00]: But we know exactly what you're going to expect.

[00:22:10] [SPEAKER_00]: So another thing we have access to, we have, we have national

[00:22:13] [SPEAKER_00]: construction companies that we get quarterly updates on.

[00:22:17] [SPEAKER_00]: We have been the Northeast, Northwest, Southeast, Midwest, average

[00:22:21] [SPEAKER_00]: price per square foot resident for retail, industrial and office.

[00:22:25] [SPEAKER_00]: So we have an ideal what things are going to cost.

[00:22:28] [SPEAKER_00]: And I normally present this to a gym owner.

[00:22:29] [SPEAKER_00]: Like for example, gym owner gets a 1000 square foot space or let's do

[00:22:34] [SPEAKER_00]: 2000 square foot space.

[00:22:35] [SPEAKER_00]: And I say, okay, based in your market, you're probably looking at

[00:22:38] [SPEAKER_00]: maybe $200 square foot is like $200 a square foot.

[00:22:42] [SPEAKER_00]: So $400,000 of build out.

[00:22:45] [SPEAKER_00]: Yeah.

[00:22:46] [SPEAKER_00]: Like that's insane.

[00:22:47] [SPEAKER_00]: You're my dad used to be a plumber.

[00:22:50] [SPEAKER_00]: I know man, I'm I promise you I'm not making this up.

[00:22:54] [SPEAKER_00]: Now if we can get it down and under, you know, that's phenomenal.

[00:22:57] [SPEAKER_00]: But I'm saying like worst case, this is what you have to be prepared

[00:23:00] [SPEAKER_00]: for.

[00:23:00] [SPEAKER_00]: And I've had people come to me where it's too little too late.

[00:23:03] [SPEAKER_00]: I mean, I didn't start their project, but they reach out for consulting.

[00:23:07] [SPEAKER_00]: And the problem is we are over budget or construction.

[00:23:10] [SPEAKER_00]: We were told by the whatever is going to be 135.

[00:23:13] [SPEAKER_00]: It's now 165 and we don't know where to come up with the extra money.

[00:23:18] [SPEAKER_00]: It's like that is probably one of the biggest spots is thinking

[00:23:22] [SPEAKER_00]: that it's going to be things are going to be turned out ideally.

[00:23:26] [SPEAKER_00]: I always, you know, whatever that's saying is plan for the worst

[00:23:29] [SPEAKER_00]: hope for the best.

[00:23:30] [SPEAKER_00]: So for anyone listening, I generally budget at least 30% over budget.

[00:23:34] [SPEAKER_00]: Whatever a construction company tells you plan for 30% more.

[00:23:39] [SPEAKER_00]: OK, it's not necessarily because they do a bad job and it's not

[00:23:42] [SPEAKER_00]: necessarily that you made too many changes.

[00:23:44] [SPEAKER_00]: So sometimes it is.

[00:23:45] [SPEAKER_00]: It's just unfortunately the way things happen.

[00:23:47] [SPEAKER_00]: The city comes in and gets involved.

[00:23:49] [SPEAKER_00]: You didn't pass this inspection.

[00:23:50] [SPEAKER_00]: You've got to do this, blah, blah, blah.

[00:23:52] [SPEAKER_00]: And then with timelines, it generally looks to be like 30%

[00:23:56] [SPEAKER_00]: over as well.

[00:23:57] [SPEAKER_00]: Someone tells you was going to be a nine month build out.

[00:24:00] [SPEAKER_00]: I would say it's probably going to be closer to a year.

[00:24:02] [SPEAKER_01]: That's you're not the first one to say that on this podcast is

[00:24:05] [SPEAKER_01]: under capitalization of especially, you know, just in a single location,

[00:24:09] [SPEAKER_01]: but people are trying to franchise back to three to four corkley locations

[00:24:13] [SPEAKER_01]: up to the franchise model.

[00:24:15] [SPEAKER_01]: Many stories, you know, firsthand of people just ran out of cash.

[00:24:19] [SPEAKER_01]: Like, you know, like Rick Mayo was on this podcast.

[00:24:21] [SPEAKER_01]: We talked about he's like, hey, if you're going to

[00:24:22] [SPEAKER_01]: franchise, you need five million.

[00:24:24] [SPEAKER_01]: Yeah. Minimum.

[00:24:25] [SPEAKER_01]: I was like, OK.

[00:24:25] [SPEAKER_01]: He's there.

[00:24:26] [SPEAKER_00]: He got Rick has done a phenomenal job of those alloys.

[00:24:29] [SPEAKER_00]: I mean, they're in about 1600 square feet.

[00:24:31] [SPEAKER_00]: So one of the other things we do is we'll do op cap analysis.

[00:24:34] [SPEAKER_00]: Op cap is just operational capacity for everyone listening.

[00:24:37] [SPEAKER_00]: It's just it's a term I stole from a lot of university studies.

[00:24:40] [SPEAKER_00]: Actually, they were done on prison systems.

[00:24:42] [SPEAKER_00]: They were trying to figure out how many prisoners they get fit

[00:24:44] [SPEAKER_00]: into a certain prison without people killing each other and all this

[00:24:48] [SPEAKER_00]: other stuff is that study of the efficiency or inefficiency of square footage.

[00:24:52] [SPEAKER_00]: I just took that and I applied it to the group fitness model with

[00:24:56] [SPEAKER_00]: CrossFit, especially CrossFit is one of the worst operational capacity

[00:24:59] [SPEAKER_00]: models out there because the equipment and seven foot barbells and.

[00:25:02] [SPEAKER_00]: It's just not very organized.

[00:25:04] [SPEAKER_00]: But with op cap, we do an analysis.

[00:25:06] [SPEAKER_00]: So all of people like any 5000 square feet and we will analyze

[00:25:09] [SPEAKER_00]: their current floor layout and customers and all that.

[00:25:13] [SPEAKER_00]: And I'll show them through math.

[00:25:16] [SPEAKER_00]: No, you actually could do 3500 square feet, which gets you a nicer location.

[00:25:19] [SPEAKER_00]: You could spend more on your build out if you want or save the cash,

[00:25:23] [SPEAKER_00]: but you don't need 5000.

[00:25:24] [SPEAKER_00]: Most gym owners, especially momopops think they need more space than they do

[00:25:28] [SPEAKER_00]: or they want like things they don't need.

[00:25:31] [SPEAKER_00]: I would like an area student has couches for members to sit at afterwards

[00:25:35] [SPEAKER_00]: and just recover and hang out and just like, you know, just an area

[00:25:39] [SPEAKER_00]: for them to socialize and really, you know, just become a part of the community.

[00:25:42] [SPEAKER_00]: And I'm like, if you have the money, great.

[00:25:45] [SPEAKER_00]: But that extra 500 square feet could cost you an extra quarter

[00:25:49] [SPEAKER_00]: of a million dollars over a 10 year lease.

[00:25:51] [SPEAKER_00]: So yeah, I don't think so.

[00:25:54] [SPEAKER_00]: I you know, if we really weigh the pros and cons here because we have

[00:25:58] [SPEAKER_00]: RSF rentable square footage within commercial real estate,

[00:26:01] [SPEAKER_00]: it's one of the things we look at.

[00:26:02] [SPEAKER_00]: But in the op cap analysis that we'll do, we have sellable square footage,

[00:26:06] [SPEAKER_00]: right, or revenue square footage.

[00:26:08] [SPEAKER_00]: And that the lounge where people hang out at were Norma tech boots

[00:26:12] [SPEAKER_00]: that you have to clean up every single time and less than 10 percent

[00:26:16] [SPEAKER_00]: of the gym uses it isn't generating you any revenue.

[00:26:18] [SPEAKER_00]: So it's just stuff like that.

[00:26:21] [SPEAKER_00]: It's just helping people and we don't know.

[00:26:23] [SPEAKER_00]: We don't know.

[00:26:24] [SPEAKER_00]: Think of every aspect of small business ownership that the average

[00:26:27] [SPEAKER_00]: small business owner, myself included, doesn't know or didn't know

[00:26:31] [SPEAKER_00]: times that by 10 on the commercial real estate side.

[00:26:33] [SPEAKER_00]: And it's just crazy because it's one of the biggest

[00:26:35] [SPEAKER_00]: the most expensive decisions we have as a small business owner

[00:26:38] [SPEAKER_00]: who's going to do brick and mortar.

[00:26:39] [SPEAKER_01]: Yeah, it's it's you know, everyone follows their dream, right?

[00:26:42] [SPEAKER_01]: Follows their passion.

[00:26:43] [SPEAKER_01]: I think you and I have talked about the little disdain for following passion.

[00:26:48] [SPEAKER_01]: Sure, because it's quite less without profit.

[00:26:51] [SPEAKER_01]: So it only gets you so far, but it is it can be a very

[00:26:55] [SPEAKER_01]: entirely very motivating thing, but yet very intoxicating

[00:26:58] [SPEAKER_01]: into the point where you can make some strong mistakes.

[00:27:00] [SPEAKER_01]: So it gets you off the couch and motivated to follow your dream.

[00:27:03] [SPEAKER_01]: But then again, you have to be grounded in reality.

[00:27:05] [SPEAKER_01]: And I feel like what you're doing here is an excellent job

[00:27:07] [SPEAKER_01]: of grounding people in the reality of their choices.

[00:27:09] [SPEAKER_00]: I look at it as in the on the passion thing.

[00:27:11] [SPEAKER_00]: This ties in, but it's a passion is fleeting.

[00:27:14] [SPEAKER_00]: Passion is a spike of emotion, right?

[00:27:16] [SPEAKER_00]: Like when you're in love, like you're in love with somebody

[00:27:18] [SPEAKER_00]: that first six months, you might still love somebody,

[00:27:22] [SPEAKER_00]: but like you're not for six months in love with them.

[00:27:25] [SPEAKER_00]: Maybe maybe if you are, congrats, it is incredible.

[00:27:27] [SPEAKER_00]: But like it's facts and feelings.

[00:27:29] [SPEAKER_00]: I always start this off with a call because I can come off

[00:27:32] [SPEAKER_00]: a little brash sometimes.

[00:27:33] [SPEAKER_00]: So hey, today we're going to separate everything we talk about

[00:27:35] [SPEAKER_00]: into facts and feelings.

[00:27:38] [SPEAKER_00]: And there are things people will say like, yeah,

[00:27:41] [SPEAKER_00]: but if I just had more space, I could sell more.

[00:27:44] [SPEAKER_00]: That's a feeling that is speculative.

[00:27:46] [SPEAKER_00]: Like you are making a statement that is not rooted in fact.

[00:27:49] [SPEAKER_00]: You are assumed.

[00:27:51] [SPEAKER_00]: The fact is you have the square footage you have now

[00:27:53] [SPEAKER_00]: and you have not hit your sales goals in six months.

[00:27:55] [SPEAKER_00]: That's a fact.

[00:27:57] [SPEAKER_00]: So when you start separating it, it kind of, you know,

[00:27:59] [SPEAKER_00]: it bonks the ego of the business owner for a second.

[00:28:02] [SPEAKER_00]: But most of them stopped by like, yeah, I needed that.

[00:28:05] [SPEAKER_00]: I need someone to kind of hold the mirror in front of me

[00:28:07] [SPEAKER_00]: and make me see that bullshit.

[00:28:09] [SPEAKER_00]: And what I'm saying, because when someone says it back to you,

[00:28:12] [SPEAKER_00]: you can hear the, oh my God, because even as they say it to me

[00:28:16] [SPEAKER_00]: and I say it back to them, they know exactly what's coming next.

[00:28:19] [SPEAKER_00]: So like, yeah, that did sound a little aspirational.

[00:28:22] [SPEAKER_00]: That sounded a little high level.

[00:28:24] [SPEAKER_00]: I get you like, they already know where I'm going with it.

[00:28:26] [SPEAKER_00]: But that's what we need.

[00:28:26] [SPEAKER_00]: I need that.

[00:28:27] [SPEAKER_00]: I've got mentors and advisors in different spaces

[00:28:29] [SPEAKER_00]: that I need to do that with me as well.

[00:28:32] [SPEAKER_01]: Yeah, I think if I was, you know, if I look at one

[00:28:35] [SPEAKER_01]: mistake over my operator days is when we went from

[00:28:38] [SPEAKER_01]: 3,000 square feet to five.

[00:28:40] [SPEAKER_01]: So we took over the location next door and we weren't, you know,

[00:28:43] [SPEAKER_01]: we're running about 200 members in a CrossFit class.

[00:28:46] [SPEAKER_01]: It was good size, but we still didn't even

[00:28:47] [SPEAKER_01]: learn that operational capacity, right?

[00:28:49] [SPEAKER_01]: But I'm like, you know what, I'm going to take this over.

[00:28:51] [SPEAKER_01]: I'm going to create this beautiful personal training studio

[00:28:53] [SPEAKER_01]: and maybe take the OPEX model.

[00:28:55] [SPEAKER_01]: And I'm going to, I'm going to will this into what I want.

[00:28:59] [SPEAKER_01]: And I'm just going to put pressure on me to sell it.

[00:29:02] [SPEAKER_01]: And it was, it was a mistake.

[00:29:03] [SPEAKER_01]: You know, it really was.

[00:29:04] [SPEAKER_01]: I mean, after we sold it, I wish I could have got out of it

[00:29:06] [SPEAKER_01]: two years later because I was just sad over there.

[00:29:08] [SPEAKER_01]: People were like, what do you do?

[00:29:09] [SPEAKER_01]: Anyway, to your point, I think we all fall for it, right?

[00:29:13] [SPEAKER_01]: We all maybe get some days highly confident, other days

[00:29:16] [SPEAKER_01]: for more realistic, but there's, you need someone

[00:29:18] [SPEAKER_01]: from an outside perspective to look at the numbers and the facts

[00:29:21] [SPEAKER_01]: and like provide you with the information to make the correct decision.

[00:29:25] [SPEAKER_00]: Did you, Eric, when you were about getting your spaces,

[00:29:27] [SPEAKER_00]: did you use a commercial real estate broker when you did it?

[00:29:29] [SPEAKER_00]: Yeah.

[00:29:30] [SPEAKER_01]: Yeah.

[00:29:31] [SPEAKER_00]: It's interesting.

[00:29:32] [SPEAKER_00]: Okay.

[00:29:33] [SPEAKER_00]: So like somebody who had a connection with, who had a vested

[00:29:35] [SPEAKER_00]: interest in you, that kind of thing.

[00:29:37] [SPEAKER_00]: Very trustworthy.

[00:29:38] [SPEAKER_00]: And that's, that's the thing is I wish I would have

[00:29:41] [SPEAKER_00]: more of those experiences.

[00:29:42] [SPEAKER_00]: One of the other things that led to this was kind of this vengeful.

[00:29:46] [SPEAKER_00]: I've never had great tenant representation.

[00:29:48] [SPEAKER_00]: That's the only thing we do.

[00:29:49] [SPEAKER_00]: We only represent tenants and buyers.

[00:29:51] [SPEAKER_00]: We don't represent landlords, but I am a landlord.

[00:29:54] [SPEAKER_00]: So it allows me when I come to the negotiating table,

[00:29:56] [SPEAKER_00]: I don't think like a broker would like what's I think

[00:29:59] [SPEAKER_00]: about the landlords per view on it.

[00:30:02] [SPEAKER_00]: And it allows for more successful negotiations in my experience.

[00:30:05] [SPEAKER_00]: But the broker thing is interesting.

[00:30:07] [SPEAKER_00]: Since 2014, when I knew I was going to buy commercial real estate,

[00:30:10] [SPEAKER_00]: I started going to these local meetup.com.

[00:30:13] [SPEAKER_00]: I think that's still a website.

[00:30:14] [SPEAKER_00]: They have local broker meetups and there'd be things here.

[00:30:17] [SPEAKER_00]: CBR would put on and different companies and I'd go

[00:30:19] [SPEAKER_00]: and I'm not a broker.

[00:30:21] [SPEAKER_00]: I was just a small business owner in Lululemon,

[00:30:24] [SPEAKER_00]: probably sweaty from coaching the class who wanted to learn

[00:30:26] [SPEAKER_00]: more about commercial real estate.

[00:30:28] [SPEAKER_00]: And when you listen to career brokers have a couple

[00:30:32] [SPEAKER_00]: scotches and talk shop, you realize how bad representation

[00:30:38] [SPEAKER_00]: for a tenant actually is.

[00:30:40] [SPEAKER_00]: And you got to think of it like this.

[00:30:41] [SPEAKER_00]: If you're a career broker in, let's see where I'm at,

[00:30:43] [SPEAKER_00]: Charlotte, North Carolina, I might have that

[00:30:45] [SPEAKER_00]: gym owner as a customer one time.

[00:30:48] [SPEAKER_00]: Maybe I get them again in five to seven years at the end

[00:30:52] [SPEAKER_00]: of the lease if they're still in business.

[00:30:54] [SPEAKER_00]: But the landlord, that landlord likely doesn't just

[00:30:58] [SPEAKER_00]: own one building.

[00:30:59] [SPEAKER_00]: He likely owns lots of buildings and not only is it

[00:31:02] [SPEAKER_00]: the landlord I'm dealing with, I'm dealing with

[00:31:04] [SPEAKER_00]: the listing agent, another professional commercial

[00:31:06] [SPEAKER_00]: real estate broker in my market.

[00:31:08] [SPEAKER_00]: Am I going to really hard negotiate and fuck them?

[00:31:13] [SPEAKER_00]: Who I'm going to have to do business with probably

[00:31:15] [SPEAKER_00]: regularly consistently in my career or I'm going

[00:31:19] [SPEAKER_00]: to tell the client my gym owner, yeah, man,

[00:31:21] [SPEAKER_00]: I think 32 bucks a square foot.

[00:31:22] [SPEAKER_00]: That's kind of, I think that's pretty much as low

[00:31:25] [SPEAKER_00]: as they're going to go when really at those scotches

[00:31:27] [SPEAKER_00]: that meet up afterwards, they go to like, yeah, duty.

[00:31:30] [SPEAKER_00]: He's like, we could have gone down to 28, but I don't

[00:31:32] [SPEAKER_00]: want to screw John.

[00:31:33] [SPEAKER_00]: I've got four other deals with John this year.

[00:31:35] [SPEAKER_00]: Right.

[00:31:35] [SPEAKER_00]: And when I learned that, I was like, that makes sense.

[00:31:39] [SPEAKER_00]: Right.

[00:31:39] [SPEAKER_00]: I'm watching a soprano's movie.

[00:31:41] [SPEAKER_00]: It's like the mob.

[00:31:41] [SPEAKER_00]: It's like anything else.

[00:31:42] [SPEAKER_00]: I'm like, I get it.

[00:31:43] [SPEAKER_00]: It's a good old boys club.

[00:31:45] [SPEAKER_00]: That I was just like, I was so annoyed because

[00:31:48] [SPEAKER_00]: that had happened to me.

[00:31:49] [SPEAKER_00]: And so now the nice thing is because I'm not a

[00:31:51] [SPEAKER_00]: broker, I get to go in the state.

[00:31:52] [SPEAKER_00]: And I don't have to play friendly with anyone.

[00:31:55] [SPEAKER_00]: I can literally just hard negotiate my ass off

[00:31:57] [SPEAKER_00]: for the gym owner because my career might is not tied

[00:32:01] [SPEAKER_00]: to whether that landlord likes.

[00:32:03] [SPEAKER_01]: Yeah, awesome man.

[00:32:04] [SPEAKER_01]: I love it.

[00:32:05] [SPEAKER_01]: And you know, I was thinking about as you were

[00:32:07] [SPEAKER_01]: talking when I eventually sold the gym, we got

[00:32:10] [SPEAKER_01]: squeezed so hard by our landlord.

[00:32:12] [SPEAKER_01]: Like last minute he knew I was selling, want to

[00:32:15] [SPEAKER_01]: come in and just jack the whole thing up.

[00:32:18] [SPEAKER_01]: And thank God we got him on a technicality

[00:32:20] [SPEAKER_01]: because he would have ruined everything with no

[00:32:24] [SPEAKER_01]: heart.

[00:32:24] [SPEAKER_01]: Like this guy who come in every once in a while, say

[00:32:26] [SPEAKER_01]: hi, thought we were buddies, but the last moment,

[00:32:28] [SPEAKER_01]: he didn't care.

[00:32:29] [SPEAKER_01]: He didn't really care.

[00:32:30] [SPEAKER_01]: No, it's good to have somebody know the system.

[00:32:33] [SPEAKER_00]: Yeah, I do like I want to do respect the

[00:32:35] [SPEAKER_00]: landlords.

[00:32:35] [SPEAKER_00]: I feel like tenants are always like screw this

[00:32:37] [SPEAKER_00]: guy, like triple that leases have become the

[00:32:39] [SPEAKER_00]: thing.

[00:32:39] [SPEAKER_00]: Like when you and me both started, you

[00:32:41] [SPEAKER_00]: probably had like an industrial gross lease,

[00:32:43] [SPEAKER_00]: like a flat rate or did you have triple net

[00:32:44] [SPEAKER_00]: from the beginning?

[00:32:45] [SPEAKER_00]: I had a flat rate and then I went to triple

[00:32:47] [SPEAKER_00]: net and my next location.

[00:32:49] [SPEAKER_00]: And that's something that catches a lot of

[00:32:51] [SPEAKER_00]: people, a lot of brokers don't actually tell

[00:32:53] [SPEAKER_00]: the tenant the severity of a triple net.

[00:32:56] [SPEAKER_00]: If for everyone listening, triple net just

[00:32:58] [SPEAKER_00]: means that you as the tenant are responsible

[00:33:00] [SPEAKER_00]: for the property taxes of the building or

[00:33:04] [SPEAKER_00]: at least your pro rata share of it.

[00:33:05] [SPEAKER_00]: If you're like in a bay or a suite with

[00:33:07] [SPEAKER_00]: multiple other tenants, the building

[00:33:09] [SPEAKER_00]: insurance, actual insurance for the

[00:33:12] [SPEAKER_00]: property and then any cam, common area

[00:33:14] [SPEAKER_00]: maintenance.

[00:33:15] [SPEAKER_00]: And as those things go up, so does your

[00:33:18] [SPEAKER_00]: red.

[00:33:19] [SPEAKER_00]: So even though you the broker might have

[00:33:20] [SPEAKER_00]: negotiated a really good base rental rate for

[00:33:23] [SPEAKER_00]: your X minus square feet.

[00:33:25] [SPEAKER_00]: The triple net is an estimate.

[00:33:27] [SPEAKER_00]: So if anyone listening to this a great

[00:33:29] [SPEAKER_00]: tactic, if you are in a triple net lease

[00:33:30] [SPEAKER_00]: and your landlord has not provided you

[00:33:33] [SPEAKER_00]: upon the closing of every year, a triple

[00:33:36] [SPEAKER_00]: net audit or reconciliation as we call

[00:33:39] [SPEAKER_00]: we call it a wreck in the industry.

[00:33:41] [SPEAKER_00]: That just shows here's my receipts.

[00:33:43] [SPEAKER_00]: Here's what my property taxes were.

[00:33:45] [SPEAKER_00]: Here's what my insurance was.

[00:33:47] [SPEAKER_00]: Here's what I spent on the snow removal

[00:33:48] [SPEAKER_00]: and the bushes and the landscaping.

[00:33:50] [SPEAKER_00]: And you add all that up.

[00:33:52] [SPEAKER_00]: And if it's just a standalone building,

[00:33:54] [SPEAKER_00]: you just divide it by your square footage.

[00:33:55] [SPEAKER_00]: All right.

[00:33:56] [SPEAKER_00]: And that'll give you the annual amount

[00:33:57] [SPEAKER_00]: that was added to your rent and should

[00:33:58] [SPEAKER_00]: dollar for dollar matchup.

[00:34:00] [SPEAKER_00]: If you're a tenant in with a multi unit

[00:34:02] [SPEAKER_00]: building, you just divide it by your

[00:34:04] [SPEAKER_00]: pro rata share.

[00:34:05] [SPEAKER_00]: But if you have not been getting that,

[00:34:06] [SPEAKER_00]: I had a client come we found out

[00:34:08] [SPEAKER_00]: there's nothing I could do about it.

[00:34:09] [SPEAKER_00]: A lawyer has to do it at this point.

[00:34:11] [SPEAKER_00]: We found out that landlord had been

[00:34:13] [SPEAKER_00]: overcharging him on triple net.

[00:34:15] [SPEAKER_00]: I mean, we're talking to the tunes of

[00:34:17] [SPEAKER_00]: five figures every year.

[00:34:19] [SPEAKER_00]: It's insane.

[00:34:20] [SPEAKER_00]: But nobody I didn't know I wouldn't

[00:34:22] [SPEAKER_00]: have never known to ask that question

[00:34:24] [SPEAKER_00]: until I got into this.

[00:34:26] [SPEAKER_00]: So yeah, guys, anyone listening, make

[00:34:28] [SPEAKER_00]: sure at the end of the year you ask

[00:34:29] [SPEAKER_00]: for a year your operating expenses

[00:34:32] [SPEAKER_00]: or a triple net reconciliation and

[00:34:34] [SPEAKER_00]: do not do not let them.

[00:34:37] [SPEAKER_00]: Oh, yeah, I'll get it to you get

[00:34:38] [SPEAKER_00]: that because I had to pay back.

[00:34:40] [SPEAKER_01]: Yeah, it's it's a really big deal

[00:34:43] [SPEAKER_01]: and it caught me way off guard.

[00:34:45] [SPEAKER_01]: I just didn't understand.

[00:34:46] [SPEAKER_01]: I'm like, OK, so it's all going to

[00:34:47] [SPEAKER_01]: average out to about this amount.

[00:34:49] [SPEAKER_01]: Yeah, about.

[00:34:50] [SPEAKER_01]: And then came they needed a new roof.

[00:34:53] [SPEAKER_01]: Right. And I'm like, wow.

[00:34:55] [SPEAKER_01]: And that number came down.

[00:34:57] [SPEAKER_01]: That's when I was like I went

[00:34:57] [SPEAKER_01]: across I went around to all the

[00:34:59] [SPEAKER_01]: other tenants in the area like

[00:35:01] [SPEAKER_01]: you guys you guys get a massive

[00:35:02] [SPEAKER_01]: bill like yeah.

[00:35:04] [SPEAKER_01]: WTF like what the fuck are we

[00:35:05] [SPEAKER_01]: going to do about this?

[00:35:06] [SPEAKER_01]: And like there was no estimates.

[00:35:08] [SPEAKER_01]: There is no thing.

[00:35:09] [SPEAKER_01]: They just build it.

[00:35:10] [SPEAKER_01]: And then we eventually called them

[00:35:12] [SPEAKER_01]: out on it towards the end of the year.

[00:35:13] [SPEAKER_01]: And they're like, you know,

[00:35:14] [SPEAKER_01]: they had to really show all the

[00:35:15] [SPEAKER_01]: invoices and lawyers going to ball

[00:35:17] [SPEAKER_01]: wasn't pretty.

[00:35:17] [SPEAKER_01]: It was just really uncomfortable

[00:35:18] [SPEAKER_01]: and we got still got screwed in the

[00:35:20] [SPEAKER_01]: end. But it is it's a really big

[00:35:21] [SPEAKER_01]: deal. Like what you're saying

[00:35:24] [SPEAKER_01]: is absolutely goal can save you

[00:35:25] [SPEAKER_01]: a ton of money and headaches

[00:35:26] [SPEAKER_01]: and probably your business

[00:35:27] [SPEAKER_01]: if it goes really south.

[00:35:29] [SPEAKER_00]: And then look at the other side.

[00:35:30] [SPEAKER_00]: So we're talking about as tenants

[00:35:31] [SPEAKER_00]: that kind of sucks.

[00:35:32] [SPEAKER_00]: But also I'm a landlord

[00:35:33] [SPEAKER_00]: and my tenant is a triple net

[00:35:34] [SPEAKER_00]: as well.

[00:35:36] [SPEAKER_00]: It's fucking awesome for me as a

[00:35:37] [SPEAKER_00]: landlord. I love it.

[00:35:39] [SPEAKER_00]: It's incredible, right?

[00:35:41] [SPEAKER_00]: It's a business model in which I

[00:35:42] [SPEAKER_00]: don't have to pay for the increase

[00:35:44] [SPEAKER_00]: of my costs.

[00:35:45] [SPEAKER_00]: They do.

[00:35:47] [SPEAKER_00]: So this is why I tell gym owners

[00:35:49] [SPEAKER_00]: like I truly believe that buying

[00:35:50] [SPEAKER_00]: commercial real estate because you

[00:35:52] [SPEAKER_00]: can leverage an SBA 504 loan

[00:35:54] [SPEAKER_00]: or an SBA 7A

[00:35:56] [SPEAKER_00]: is really the only path

[00:35:57] [SPEAKER_00]: that it's only the only straightforward

[00:35:58] [SPEAKER_00]: path to retirement for a small

[00:36:00] [SPEAKER_00]: business owner that I can see

[00:36:02] [SPEAKER_00]: other than you doing your business

[00:36:04] [SPEAKER_00]: thing and making money for about

[00:36:06] [SPEAKER_00]: 40 years.

[00:36:07] [SPEAKER_00]: And on year one, you start to give

[00:36:09] [SPEAKER_00]: you money to a financial planner who

[00:36:11] [SPEAKER_00]: puts it in index funds because

[00:36:12] [SPEAKER_00]: that's about how much time you would

[00:36:13] [SPEAKER_00]: need for that money to actually accrue.

[00:36:16] [SPEAKER_00]: So I mean, right now I mean, I've

[00:36:17] [SPEAKER_00]: got gyms that are they're not crazy

[00:36:19] [SPEAKER_00]: problem. I was never crazy.

[00:36:20] [SPEAKER_00]: I mean, I was I mean, I did half

[00:36:22] [SPEAKER_00]: a million of my best consistently

[00:36:24] [SPEAKER_00]: on about a 26 percent margin.

[00:36:26] [SPEAKER_00]: That's not those aren't crazy

[00:36:27] [SPEAKER_00]: numbers for anybody in the fitness

[00:36:28] [SPEAKER_00]: industry. But I was able to go

[00:36:30] [SPEAKER_00]: ahead and I was able to purchase,

[00:36:31] [SPEAKER_00]: you know, a building that came

[00:36:32] [SPEAKER_00]: out to 1.3 and do the upfit

[00:36:34] [SPEAKER_00]: and the thing. And it gave

[00:36:36] [SPEAKER_00]: me an opportunity that I

[00:36:38] [SPEAKER_00]: otherwise would have never had as a

[00:36:40] [SPEAKER_00]: gym owner, even no matter how good

[00:36:41] [SPEAKER_00]: I am because the problem is as a gym

[00:36:43] [SPEAKER_00]: owner, your exits, they look like

[00:36:46] [SPEAKER_00]: replicating it kind of like Brandon

[00:36:48] [SPEAKER_00]: and Matt Ebalik have done with

[00:36:49] [SPEAKER_00]: them. They got to go franchise model

[00:36:50] [SPEAKER_00]: and like, you know, Rick Mayo said,

[00:36:52] [SPEAKER_00]: hope you have five mill lying around

[00:36:53] [SPEAKER_00]: or people are going to invest in

[00:36:54] [SPEAKER_00]: it. Number two, you sell it.

[00:36:56] [SPEAKER_00]: But I don't know if you know the

[00:36:57] [SPEAKER_00]: market for selling a used gym.

[00:36:59] [SPEAKER_00]: It's not good. Not a great market

[00:37:01] [SPEAKER_00]: to be in.

[00:37:02] [SPEAKER_00]: So then what are your options?

[00:37:04] [SPEAKER_00]: You know, it's like really small

[00:37:06] [SPEAKER_00]: business owners don't think about the

[00:37:07] [SPEAKER_00]: exit. And I think the SBA programs,

[00:37:09] [SPEAKER_00]: the 504 and the 7a specifically

[00:37:11] [SPEAKER_00]: are incredible options for you to

[00:37:13] [SPEAKER_00]: purchase real estate, put your

[00:37:15] [SPEAKER_00]: building in it, your business

[00:37:17] [SPEAKER_00]: and and to give you a little bit

[00:37:19] [SPEAKER_00]: more weight, a little significant

[00:37:20] [SPEAKER_00]: amount more control of your

[00:37:21] [SPEAKER_01]: future. So question on that,

[00:37:23] [SPEAKER_01]: like I can see in certain markets

[00:37:25] [SPEAKER_01]: buying real estate makes sense.

[00:37:27] [SPEAKER_01]: But something like where I was

[00:37:28] [SPEAKER_01]: in Santa Barbara or San Francisco

[00:37:30] [SPEAKER_01]: right? Like does it make sense

[00:37:32] [SPEAKER_01]: if we're talking about three, four,

[00:37:34] [SPEAKER_01]: five plus million to

[00:37:36] [SPEAKER_01]: buy the real estate?

[00:37:37] [SPEAKER_00]: Yeah. So I've got clients in

[00:37:38] [SPEAKER_00]: California and here's the thing

[00:37:39] [SPEAKER_00]: with California.

[00:37:41] [SPEAKER_00]: It gets more difficult

[00:37:43] [SPEAKER_00]: in this in certain sections where

[00:37:45] [SPEAKER_00]: you're at. So there is a reality

[00:37:46] [SPEAKER_00]: if you were in Manhattan, I'd say

[00:37:47] [SPEAKER_00]: nope, not happening.

[00:37:49] [SPEAKER_00]: Right. You just unfortunately not

[00:37:50] [SPEAKER_00]: having now it's not impossible.

[00:37:52] [SPEAKER_00]: So the only California, the biggest

[00:37:53] [SPEAKER_00]: pain in the butt about working

[00:37:55] [SPEAKER_00]: with clients in California, you

[00:37:56] [SPEAKER_00]: guys everything is a retail

[00:37:58] [SPEAKER_00]: shopping plan. Like it's just

[00:37:59] [SPEAKER_00]: multi-tenant buildings.

[00:38:00] [SPEAKER_00]: There's not a lot of standalone

[00:38:02] [SPEAKER_00]: old industrial factories

[00:38:03] [SPEAKER_00]: and warehouses.

[00:38:05] [SPEAKER_00]: Now, the thing that's interesting

[00:38:06] [SPEAKER_00]: about it is that means so I've

[00:38:08] [SPEAKER_00]: got a client right now.

[00:38:10] [SPEAKER_00]: He's going in and he's looking at

[00:38:11] [SPEAKER_00]: it's a four unit little strip.

[00:38:12] [SPEAKER_00]: So it's got one, two, three, four

[00:38:14] [SPEAKER_00]: suites. He's going to take down

[00:38:15] [SPEAKER_00]: two of them because the SB

[00:38:17] [SPEAKER_00]: requires you to occupy 50%

[00:38:19] [SPEAKER_00]: of the space. The other two

[00:38:20] [SPEAKER_00]: still have tenants that they

[00:38:21] [SPEAKER_00]: already cash flow.

[00:38:23] [SPEAKER_00]: His revenue in two of them

[00:38:24] [SPEAKER_00]: plus the cash flow of the other

[00:38:26] [SPEAKER_00]: two will be more than enough

[00:38:27] [SPEAKER_00]: for what we call DSCR debt

[00:38:29] [SPEAKER_00]: service coverage ratio.

[00:38:30] [SPEAKER_00]: And most banks and SB

[00:38:31] [SPEAKER_00]: I want to see around a 1.25

[00:38:33] [SPEAKER_00]: need for every hundred thousand

[00:38:34] [SPEAKER_00]: dollars you borrow, you can

[00:38:35] [SPEAKER_00]: generate 125,000 or 1.25

[00:38:38] [SPEAKER_00]: that amount.

[00:38:40] [SPEAKER_00]: Those are the gets interesting.

[00:38:42] [SPEAKER_00]: Now there's other scenarios

[00:38:42] [SPEAKER_00]: where unfortunately I will take

[00:38:44] [SPEAKER_00]: clients and like, hey, I

[00:38:45] [SPEAKER_00]: apologize. It's not a good thing.

[00:38:47] [SPEAKER_00]: You're not going to be able to

[00:38:47] [SPEAKER_00]: SBA this thing.

[00:38:50] [SPEAKER_00]: However, you might be able to

[00:38:51] [SPEAKER_00]: conventionally loan it if you

[00:38:53] [SPEAKER_00]: can find one of those one percent

[00:38:54] [SPEAKER_00]: or clients in your gym who also

[00:38:56] [SPEAKER_00]: wants to get involved in

[00:38:57] [SPEAKER_00]: commercial real estate.

[00:38:58] [SPEAKER_00]: Now there's an opportunity

[00:38:59] [SPEAKER_00]: because what is every

[00:38:59] [SPEAKER_00]: conventional investor and

[00:39:01] [SPEAKER_00]: commercial real estate want?

[00:39:02] [SPEAKER_00]: They want to buy a building with

[00:39:04] [SPEAKER_00]: a tenant that pays the money.

[00:39:05] [SPEAKER_00]: Well, that one percent client

[00:39:06] [SPEAKER_00]: of yours has been there for

[00:39:07] [SPEAKER_00]: several years goes, oh, shit,

[00:39:09] [SPEAKER_00]: you're pretty good at this.

[00:39:10] [SPEAKER_00]: How about this? I got an idea.

[00:39:12] [SPEAKER_00]: We buy a building together.

[00:39:13] [SPEAKER_00]: I put up the cash.

[00:39:14] [SPEAKER_00]: You be my tenant for a period

[00:39:16] [SPEAKER_00]: of time. Every year, I'll let

[00:39:17] [SPEAKER_00]: you vest a little bit of equity

[00:39:19] [SPEAKER_00]: into that thing and you can

[00:39:20] [SPEAKER_00]: put some cash up front.

[00:39:21] [SPEAKER_00]: And then in a certain point

[00:39:22] [SPEAKER_00]: we exit like we've got we've

[00:39:24] [SPEAKER_00]: drawn up more plans than

[00:39:25] [SPEAKER_00]: I can I can even recall

[00:39:27] [SPEAKER_00]: on how a small business

[00:39:29] [SPEAKER_00]: owner zero cash in

[00:39:30] [SPEAKER_00]: and a cash equity

[00:39:33] [SPEAKER_00]: partner can go and purchase a

[00:39:34] [SPEAKER_00]: building and that gym owner can

[00:39:36] [SPEAKER_00]: slowly accrue ownership

[00:39:37] [SPEAKER_00]: in the building over time

[00:39:39] [SPEAKER_00]: because most times a gym owner

[00:39:41] [SPEAKER_00]: isn't also ready to quit being

[00:39:42] [SPEAKER_00]: a gym owner. Right? They want

[00:39:43] [SPEAKER_00]: to keep playing the game for

[00:39:44] [SPEAKER_00]: at least a while longer.

[00:39:46] [SPEAKER_00]: And there are plenty of

[00:39:47] [SPEAKER_00]: opportunities there. But yes,

[00:39:48] [SPEAKER_00]: you will likely have to

[00:39:48] [SPEAKER_00]: partner with somebody.

[00:39:50] [SPEAKER_00]: You won't be able to do it

[00:39:51] [SPEAKER_00]: solo dolo as a small

[00:39:52] [SPEAKER_00]: business owner.

[00:39:53] [SPEAKER_01]: And this is amazing.

[00:39:55] [SPEAKER_01]: I mean, just thinking about

[00:39:56] [SPEAKER_01]: how you're really

[00:39:57] [SPEAKER_01]: teaching people how to leverage

[00:39:59] [SPEAKER_01]: all the potential opportunities

[00:40:01] [SPEAKER_01]: that they have as a business

[00:40:02] [SPEAKER_01]: owner. Right? It's not just

[00:40:04] [SPEAKER_01]: coming every day, teach people

[00:40:05] [SPEAKER_01]: fitness, go home.

[00:40:07] [SPEAKER_01]: Right? There's a lot more

[00:40:08] [SPEAKER_01]: opportunity that you can

[00:40:09] [SPEAKER_01]: actually build something

[00:40:10] [SPEAKER_01]: that you can actually retire

[00:40:11] [SPEAKER_01]: on right that you can move

[00:40:13] [SPEAKER_01]: on from something you have

[00:40:14] [SPEAKER_01]: an actual asset because

[00:40:16] [SPEAKER_01]: you're right. I mean, selling

[00:40:17] [SPEAKER_01]: a boutique gym or an

[00:40:19] [SPEAKER_01]: independent gym is not a big

[00:40:20] [SPEAKER_01]: market for most people just

[00:40:21] [SPEAKER_01]: close it down and walk away

[00:40:22] [SPEAKER_01]: and take the loss.

[00:40:24] [SPEAKER_01]: And this is something that

[00:40:25] [SPEAKER_01]: I think is really important

[00:40:27] [SPEAKER_01]: is like teaching.

[00:40:28] [SPEAKER_01]: And we talk about like, you

[00:40:30] [SPEAKER_01]: got to show your business as a

[00:40:31] [SPEAKER_01]: business. Like, OK, SOPs

[00:40:33] [SPEAKER_01]: and hiring and all that stuff

[00:40:34] [SPEAKER_01]: that you've taught people

[00:40:35] [SPEAKER_01]: probably over and over again.

[00:40:36] [SPEAKER_01]: But this is wealth creation

[00:40:38] [SPEAKER_01]: or least ways to stay out of

[00:40:41] [SPEAKER_01]: tremendous debt.

[00:40:42] [SPEAKER_01]: Both you can swing both ways.

[00:40:43] [SPEAKER_01]: So I think it's really important.

[00:40:45] [SPEAKER_01]: I mean, I'm learning a lot.

[00:40:45] [SPEAKER_01]: It's kind of actually firing me

[00:40:46] [SPEAKER_01]: up to maybe get some

[00:40:48] [SPEAKER_01]: commercial real estate nearby.

[00:40:49] [SPEAKER_01]: But it's really important.

[00:40:50] [SPEAKER_01]: I mean, have you

[00:40:52] [SPEAKER_01]: has you as you've evolved

[00:40:53] [SPEAKER_01]: as a gym consultant?

[00:40:55] [SPEAKER_01]: Where you're at now?

[00:40:56] [SPEAKER_01]: Like how much more are you

[00:40:57] [SPEAKER_01]: more or less excited about what

[00:40:59] [SPEAKER_01]: you're doing now than you were

[00:41:00] [SPEAKER_01]: five, seven years ago when you

[00:41:02] [SPEAKER_01]: were teaching, you know, like

[00:41:03] [SPEAKER_01]: the basics of gym ownership?

[00:41:04] [SPEAKER_01]: Or is it just are you just

[00:41:06] [SPEAKER_01]: evolving with with the times?

[00:41:09] [SPEAKER_00]: It's a great question.

[00:41:09] [SPEAKER_00]: And for a lot of the gym

[00:41:11] [SPEAKER_00]: owners out there, the trainers

[00:41:12] [SPEAKER_00]: listening to this show,

[00:41:13] [SPEAKER_00]: when you first start off as a

[00:41:15] [SPEAKER_00]: trainer, nothing cites you

[00:41:16] [SPEAKER_00]: up more than teaching Sally how

[00:41:17] [SPEAKER_00]: to squat.

[00:41:18] [SPEAKER_00]: And then after a while,

[00:41:20] [SPEAKER_00]: generally, you know, maybe

[00:41:21] [SPEAKER_00]: close to maybe 10 years in the

[00:41:22] [SPEAKER_00]: game or somewhere, maybe short

[00:41:23] [SPEAKER_00]: of that, you then want to

[00:41:24] [SPEAKER_00]: teach other trainers how to

[00:41:26] [SPEAKER_00]: teach Sally how to squat.

[00:41:27] [SPEAKER_00]: And then we just all we just

[00:41:28] [SPEAKER_00]: have this constant evolution

[00:41:30] [SPEAKER_00]: of what we know.

[00:41:32] [SPEAKER_00]: And the more we know, the more

[00:41:33] [SPEAKER_00]: we want to utilize it.

[00:41:34] [SPEAKER_00]: But if I'm still just teaching

[00:41:35] [SPEAKER_00]: Sally how to squat, but I've

[00:41:36] [SPEAKER_00]: learned how to teach other

[00:41:38] [SPEAKER_00]: trainers and then teach

[00:41:39] [SPEAKER_00]: other trainers how to sell

[00:41:40] [SPEAKER_00]: there, you know, you get this

[00:41:41] [SPEAKER_00]: this void for me.

[00:41:43] [SPEAKER_00]: Yeah. When I first started, I

[00:41:45] [SPEAKER_00]: had I've been in the industry.

[00:41:46] [SPEAKER_00]: I started in the global gym

[00:41:47] [SPEAKER_00]: thing. I, you know, from the

[00:41:48] [SPEAKER_00]: very first day I came in, it

[00:41:50] [SPEAKER_00]: was kind of in a consulting

[00:41:51] [SPEAKER_00]: role. And I did enjoy just

[00:41:53] [SPEAKER_00]: working with just the basic

[00:41:54] [SPEAKER_00]: business problems.

[00:41:55] [SPEAKER_00]: And now that's different

[00:41:57] [SPEAKER_00]: for now. Now it's higher level

[00:41:58] [SPEAKER_00]: stuff, it's expansion.

[00:41:59] [SPEAKER_00]: It's how do we how do we scale

[00:42:01] [SPEAKER_00]: this thing or how do we go find

[00:42:03] [SPEAKER_00]: funding or get attraction from

[00:42:04] [SPEAKER_00]: someone who can take us through

[00:42:05] [SPEAKER_00]: the FDD process or how do we

[00:42:07] [SPEAKER_00]: buy a location or how do you

[00:42:08] [SPEAKER_00]: know where do we open up these

[00:42:09] [SPEAKER_00]: three locations in Boston?

[00:42:11] [SPEAKER_00]: And those problems are very

[00:42:13] [SPEAKER_00]: similar to teaching the gym

[00:42:14] [SPEAKER_00]: or SOPs just of

[00:42:16] [SPEAKER_00]: a higher degree.

[00:42:18] [SPEAKER_00]: And what's the hermose quote?

[00:42:20] [SPEAKER_00]: If you solve rich people's

[00:42:21] [SPEAKER_00]: problems, they pay better.

[00:42:22] [SPEAKER_00]: And so that's also really

[00:42:24] [SPEAKER_00]: dope too. So I don't mind

[00:42:25] [SPEAKER_00]: that part either as well.

[00:42:27] [SPEAKER_01]: We'll ask question for you here,

[00:42:28] [SPEAKER_01]: Steve, while I got you.

[00:42:29] [SPEAKER_01]: What do you think in the sector

[00:42:31] [SPEAKER_01]: that you work in, you know, the

[00:42:32] [SPEAKER_01]: boutique micro gym, whatever you

[00:42:34] [SPEAKER_01]: want to call it?

[00:42:35] [SPEAKER_01]: Can we really find it?

[00:42:36] [SPEAKER_01]: What's the hottest modality?

[00:42:38] [SPEAKER_01]: What do you think has got what's

[00:42:40] [SPEAKER_01]: so hot right now?

[00:42:41] [SPEAKER_00]: I'll be honest, it's nothing in

[00:42:42] [SPEAKER_00]: the micro. I think the hottest

[00:42:43] [SPEAKER_00]: thing right now is going to be

[00:42:44] [SPEAKER_00]: the boutique.

[00:42:46] [SPEAKER_00]: I hate that word, but open

[00:42:47] [SPEAKER_00]: gym. So when we think of open

[00:42:49] [SPEAKER_00]: gym, I'm thinking like think

[00:42:50] [SPEAKER_00]: of your health club, but I'm

[00:42:51] [SPEAKER_00]: not talking equinox and EOS

[00:42:53] [SPEAKER_00]: and lifetime in crunch.

[00:42:54] [SPEAKER_00]: Those are too big a footprints.

[00:42:56] [SPEAKER_00]: I'm talking what I'm seeing now

[00:42:58] [SPEAKER_00]: are 10,000 and eight to 10

[00:43:01] [SPEAKER_00]: maybe 12,000 square foot spots

[00:43:03] [SPEAKER_00]: that are opening up open gym

[00:43:05] [SPEAKER_00]: format. So again, the health

[00:43:07] [SPEAKER_00]: club kind of format, but with

[00:43:09] [SPEAKER_00]: a very, very specific

[00:43:11] [SPEAKER_00]: vibe and aesthetic to it.

[00:43:13] [SPEAKER_00]: It's going towards it's aimed

[00:43:14] [SPEAKER_00]: towards that person that wants

[00:43:16] [SPEAKER_00]: to show the world that they're

[00:43:18] [SPEAKER_00]: on Instagram that they are

[00:43:19] [SPEAKER_00]: fitness. Now it doesn't mean

[00:43:21] [SPEAKER_00]: they're an influencer. It

[00:43:21] [SPEAKER_00]: doesn't mean that's how they

[00:43:22] [SPEAKER_00]: make their money. But they are

[00:43:23] [SPEAKER_00]: someone who is very invested

[00:43:25] [SPEAKER_00]: I mean, you know what they look

[00:43:26] [SPEAKER_00]: they were in a gym shark top

[00:43:27] [SPEAKER_00]: they've got you know the head

[00:43:29] [SPEAKER_00]: over the ear headphones on like

[00:43:30] [SPEAKER_00]: they're LeBron walking through

[00:43:31] [SPEAKER_00]: the tunnel for like, you know,

[00:43:32] [SPEAKER_00]: final four game like that open

[00:43:34] [SPEAKER_00]: gym thing and because boutique

[00:43:36] [SPEAKER_00]: fitness, the group fitness model

[00:43:38] [SPEAKER_00]: for the past 1215 years has been

[00:43:40] [SPEAKER_00]: doing nothing but educating

[00:43:41] [SPEAKER_00]: consumers how to squat, how to

[00:43:43] [SPEAKER_00]: hinge, how to press, how to pull.

[00:43:45] [SPEAKER_00]: The more you educate a

[00:43:47] [SPEAKER_00]: consumer, the more likely they

[00:43:48] [SPEAKER_00]: are to become snobbish in

[00:43:50] [SPEAKER_00]: their thing. So a snob for

[00:43:52] [SPEAKER_00]: anyone listening, if you like

[00:43:54] [SPEAKER_00]: craft beer, and you started

[00:43:55] [SPEAKER_00]: like, Oh, this is pretty good.

[00:43:56] [SPEAKER_00]: And the more you drink it, you

[00:43:57] [SPEAKER_00]: became snobby, you're like that

[00:43:59] [SPEAKER_00]: brewery sucks. This one's

[00:44:00] [SPEAKER_00]: hops are phenomenal. You don't

[00:44:02] [SPEAKER_00]: know shit about fuck you just

[00:44:03] [SPEAKER_00]: are sitting here just drinking

[00:44:04] [SPEAKER_00]: a lot and you think you know

[00:44:05] [SPEAKER_00]: something that's fitness

[00:44:07] [SPEAKER_00]: customers. They've done a

[00:44:09] [SPEAKER_00]: fitness thing enough at a

[00:44:10] [SPEAKER_00]: cross with gym that they're

[00:44:11] [SPEAKER_00]: like, Oh, I know what I want.

[00:44:12] [SPEAKER_00]: I don't want to do this

[00:44:13] [SPEAKER_00]: workout that you have written.

[00:44:15] [SPEAKER_00]: I want to do this other

[00:44:16] [SPEAKER_00]: thing I saw Ryan Fisher or

[00:44:17] [SPEAKER_00]: Marcus Philly or someone else

[00:44:19] [SPEAKER_00]: do now that's a snob. They

[00:44:22] [SPEAKER_00]: have enough education as

[00:44:23] [SPEAKER_00]: consumer to make a decision as

[00:44:25] [SPEAKER_00]: to what they want. Just like

[00:44:26] [SPEAKER_00]: coffee snobs. Oh, Starbucks get

[00:44:28] [SPEAKER_00]: this burnt beans out of here. I

[00:44:30] [SPEAKER_00]: want to whatever, you know,

[00:44:32] [SPEAKER_00]: you know, Colombian grown

[00:44:34] [SPEAKER_00]: beans over at this place for

[00:44:35] [SPEAKER_00]: seven bucks. They now can do

[00:44:37] [SPEAKER_00]: that. And I think that's where

[00:44:38] [SPEAKER_00]: a lot of the segments going

[00:44:39] [SPEAKER_00]: boutique fitness is going to

[00:44:41] [SPEAKER_00]: educate a huge portion. And

[00:44:43] [SPEAKER_00]: those individuals, I think

[00:44:44] [SPEAKER_00]: we're going to find

[00:44:44] [SPEAKER_00]: themselves in an open gym

[00:44:46] [SPEAKER_00]: setting where they could pick

[00:44:47] [SPEAKER_00]: their journey. But it's not

[00:44:49] [SPEAKER_00]: going to be the YMCA. It's

[00:44:50] [SPEAKER_00]: not going to be crunch

[00:44:51] [SPEAKER_00]: fitness. It's not going to

[00:44:52] [SPEAKER_00]: be those places. It's going to

[00:44:53] [SPEAKER_00]: be a very, it's going to be a

[00:44:54] [SPEAKER_00]: premium price boutique open

[00:44:56] [SPEAKER_00]: gym model like core 24 comes

[00:44:58] [SPEAKER_00]: to mind infinite training

[00:44:59] [SPEAKER_00]: systems out of Newport Beach

[00:45:01] [SPEAKER_00]: comes to mind collective in

[00:45:03] [SPEAKER_00]: Austin, Texas comes to mind

[00:45:05] [SPEAKER_00]: really, really impressive

[00:45:06] [SPEAKER_00]: things. But that's honestly

[00:45:07] [SPEAKER_00]: the thing that's farm work

[00:45:08] [SPEAKER_00]: said not that there's any

[00:45:09] [SPEAKER_00]: wrong with group fitness or

[00:45:10] [SPEAKER_00]: it's going anywhere. But I

[00:45:12] [SPEAKER_00]: don't think anyone can deny

[00:45:13] [SPEAKER_00]: even my franchise and

[00:45:15] [SPEAKER_00]: franchise friends that we've

[00:45:17] [SPEAKER_00]: been educating people for a

[00:45:18] [SPEAKER_00]: very long time in all these

[00:45:19] [SPEAKER_00]: gyms. And if you did

[00:45:20] [SPEAKER_00]: metabolic for two years

[00:45:21] [SPEAKER_00]: CrossFit for three years

[00:45:22] [SPEAKER_00]: and orange theory for a year,

[00:45:24] [SPEAKER_00]: you know some shit on how to

[00:45:25] [SPEAKER_00]: work out. You really only

[00:45:27] [SPEAKER_00]: still go to the studio if

[00:45:28] [SPEAKER_00]: you're really, really love

[00:45:29] [SPEAKER_00]: the people there. But

[00:45:31] [SPEAKER_00]: eventually I think you're

[00:45:32] [SPEAKER_00]: going to find some interest

[00:45:32] [SPEAKER_00]: you want to train for a

[00:45:33] [SPEAKER_00]: high rocks or train for

[00:45:35] [SPEAKER_00]: this or that or do Marcus

[00:45:36] [SPEAKER_00]: Phillies functional body

[00:45:37] [SPEAKER_00]: building as some remote

[00:45:38] [SPEAKER_00]: program. And I think

[00:45:39] [SPEAKER_00]: that's where I'm really

[00:45:40] [SPEAKER_00]: interested in the next five

[00:45:42] [SPEAKER_01]: years. Awesome. Awesome, man.

[00:45:44] [SPEAKER_01]: Well, studio, she came in

[00:45:45] [SPEAKER_01]: here really unloaded value.

[00:45:47] [SPEAKER_01]: It was it was really I

[00:45:48] [SPEAKER_01]: learned a lot. You know, I

[00:45:49] [SPEAKER_01]: talked to a lot of people.

[00:45:50] [SPEAKER_01]: I think I know a little bit

[00:45:51] [SPEAKER_01]: about some things within the

[00:45:52] [SPEAKER_01]: industry where I just learned

[00:45:53] [SPEAKER_01]: quite a bit about real estate

[00:45:54] [SPEAKER_01]: that I had no fucking idea.

[00:45:56] [SPEAKER_01]: So kudos to you.

[00:45:58] [SPEAKER_01]: The you got the podcast

[00:45:59] [SPEAKER_01]: get what the fuck Jim talk.

[00:46:00] [SPEAKER_01]: You have Jim real estate

[00:46:02] [SPEAKER_01]: company dot com is at the

[00:46:03] [SPEAKER_01]: website will tell us where

[00:46:04] [SPEAKER_01]: do you want people to go

[00:46:04] [SPEAKER_00]: if you just for the Jim

[00:46:06] [SPEAKER_00]: real estate dot co anyone

[00:46:08] [SPEAKER_00]: who go on there just

[00:46:09] [SPEAKER_00]: book a free discovery call.

[00:46:10] [SPEAKER_00]: If you've got an active

[00:46:11] [SPEAKER_00]: commercial real estate

[00:46:12] [SPEAKER_00]: project you want to

[00:46:13] [SPEAKER_00]: kick off within the next

[00:46:13] [SPEAKER_00]: 12 months, please hit us up.

[00:46:15] [SPEAKER_00]: Let us know we'd love to

[00:46:16] [SPEAKER_00]: talk to you guys.

[00:46:17] [SPEAKER_00]: You can Google WTF Jim

[00:46:19] [SPEAKER_00]: talk if you know for the

[00:46:20] [SPEAKER_00]: podcast and all the content

[00:46:21] [SPEAKER_00]: and all that. But brother, I

[00:46:23] [SPEAKER_00]: have always it is an honor to

[00:46:24] [SPEAKER_00]: be on here. I see the people

[00:46:26] [SPEAKER_00]: that you interview and have on

[00:46:27] [SPEAKER_00]: the show every single week.

[00:46:29] [SPEAKER_00]: And it is is incredibly

[00:46:31] [SPEAKER_00]: impressive. And I love what

[00:46:33] [SPEAKER_00]: you're fucking doing. And I

[00:46:34] [SPEAKER_00]: hope you don't have any

[00:46:34] [SPEAKER_00]: plans of stopping any time

[00:46:36] [SPEAKER_01]: soon. No, no, you'll have

[00:46:37] [SPEAKER_01]: to drag me away.

[00:46:38] [SPEAKER_01]: So I appreciate it too.

[00:46:39] [SPEAKER_01]: I really appreciate it, man.

[00:46:41] [SPEAKER_01]: And hopefully we'll see

[00:46:42] [SPEAKER_01]: each other and soon in

[00:46:43] [SPEAKER_01]: person soon. And yeah,

[00:46:45] [SPEAKER_01]: it's awesome as always.

[00:46:46] [SPEAKER_01]: Ladies and gentlemen, Steve

[00:46:47] [SPEAKER_01]: Brower. Thank you, dude.

[00:46:49] [SPEAKER_01]: Hey, wait, don't leave yet.

[00:46:52] [SPEAKER_01]: This is your host, Eric

[00:46:53] [SPEAKER_01]: Malzone. And I hope you enjoyed

[00:46:55] [SPEAKER_01]: this episode of Future of

[00:46:56] [SPEAKER_01]: Menace. If you did, I'm going

[00:46:58] [SPEAKER_01]: to ask you to do three simple

[00:47:00] [SPEAKER_01]: things. It takes under five

[00:47:01] [SPEAKER_01]: minutes and it goes such a

[00:47:03] [SPEAKER_01]: long way. We really

[00:47:04] [SPEAKER_01]: appreciate it. Number one,

[00:47:05] [SPEAKER_01]: please subscribe to our show

[00:47:06] [SPEAKER_01]: wherever you listen to it.

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[00:47:44] [SPEAKER_01]: fitness. Have a great day.