Tony Scrimale - CR Fitness: HVLP Operational Excellence & The Private Equity Boom

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 futurofitness.co to subscribe and get weekly summaries dropped into your inbox. Now on to the show. One theme keeps coming up: the right technology can make or break your business. That's why I'm thrilled to introduce our new presenting sponsor, Perfect Gym. Perfect Gym isn't just another gym management system. They are part of the Sport Alliance Group, Europe's leading fitness software company that has officially entered the US market. Now, I've seen this movie before, but here's the difference. They've opened up a U.S. headquarters in Boston because they understand that the American market deserves dedicated, localized support. After digging into the platform, one benefit especially stood out. They are simplifying the nightmare that keeps business owners up at night migrations. These guys were able to migrate one mega client with more than 250 locations in six different countries in just 20 days between two payment runs, no disrupting operations, no member loss, one seamless operation that simply works. Now, if you have ever switched platforms, you know how terrifying that process can be and how truly impressive that feed is. At a high level, here's their secret sauce. They give the power back to the operator. Instead of forcing you into their closed ecosystem, their Perfect Gym Marketplace connects with over 120 integration partners. So want to use your own app, your preferred payment processor, class pass for booking? No problem. Whether you're running a single studio or managing a multi-location enterprise, Perfect Gym was built from the ground up for multi-club operations. They've invested a ton into this platform, and now they're bringing that European engineering excellence to America. The migration experts have arrived. Check out perfectgym.com where enterprise level sophistication meets operator freedom. Today's episode of the Future of Fitness is brought to you by Flex, the only HSA FSA payments infrastructure built specifically for leading fitness and wellness brands. I have been so impressed with the Flex team and their vision to transform how people pay for fitness. They built a platform that makes HSA and FSA spending seamless, unlocking a new revenue stream for brands and giving consumers easier access to products and services that keep them healthy. Here's why this matters. Flex helps fitness brands increase average order value by up to 50% and boost checkout conversion by 30%. That is not just incremental growth, that is transformational revenue powered by consumer dollars that are already set aside for health and wellness. What excites me the most is that Flex is changing the game for the entire industry. They're bridging the gap between healthcare and fitness by making it simple for consumers to spend their pre-tax dollars on the products and services that help them feel and perform their best. Flex works with fitness leaders like iFit, Johnson Fitness, Tempo, and Aloe Moves. Honestly, this is a no-brainer, and I rarely say that. If you want to see how Flex can drive growth for your fitness brand, visit withFlex.com. That is with Flex.com. Now onto the show. Yeah, all right, we are live. Tony Scramale, welcome to the future of fitness, my friend.

Yeah, good to be here, man. Thank you for the invite.

No, no, thank you for doing this. I mean, you uh you are a very busy man right now. And you know, as we were just discussing, I I think this is, I don't think, I know this is a really important conversation for a lot of people in the industry that we're about to have, not just highlighting the success that you guys are having at CR, but what is going on at a kind of macro level with consolidation, private equity, you know, as you're talking about, like this is probably the biggest, one of the biggest brand moments of within our industry is ever seen. Because I know there's a lot of people who, like me in 2012, who's a single gym operator, and I'm like, well, these major industry trends don't mean anything to me, but they very much do, more now than ever. And we're gonna talk about why you should be paying attention to these things because it could very well come knocking on your front door at any moment. I don't mean to like strike fear or anything like that. I'm just saying, hey, be an educated business person and operator in the industry. So we're gonna get into a lot of different stuff. So uh Tony, if you don't mind, let's start with this, dude. Give me a little bit of your background, a little bit about CR, and then we'll uh we'll take it from there.

Yeah, no problem. Been in the business now 28 years. I can't believe I'm saying that. It's uh really the only job I've had is the fitness industry. Started off just by wanting a gym job, just like most people walking in and like just want to be around people, want to be around a culture team, you know, the whole concept. And I was like, wow, this is competitive and this is cool. I get and I can get paid for it, right? You interact and kind of took off from there. Started multi-club by the time I was 19, and then and then just continued to grow uh through the ranks and uh bought it brought a couple companies to the finish line. I've been through a couple of sales, and I also was acquired at one point. I was part of an acquisition early on in my career too. So got that experience. But uh along the journey, I've had the opportunity. I've always been the first guy in. I think I've I was just doing the math the other day. I've opened up over a hundred clubs, like from pre-sale to I don't think a lot of people can really say that from the construction side of the business to just you know day one of the pre-sale and actually opened them up, and I'm over that century mark now, which is kind of cool. Um yeah.

Yeah, that's a lot of experience. Has it always been like health clubs for you by definition, or has it been, you know, all types of different gyms? Like what what's been the same?

Yeah, ironically, you're talking about the mom and pop thing. And me and my business partner, Vince Julian, uh, we had a four, you know, a four-club chain. And yeah, and it was really a mom and pop. And part of our reason to go into the crunch brand was, you know, we knew that these brands were going to start to like take off. And you know, we didn't want to kind of reinvent a no-name brand. We had a we had a four-club chain called Southside Athletic Club. And my other partner was building, he was coming in around us with Lifestyle Family Fitness, Jeff Dyer. And as, you know, yeah, as got him, so we got acquired, and then in 2010, when I was me and Vince were thinking about doing clubs, you know, we started to look at like what do we want to do? You know, do we want to do we want to open up our own brand? We even named our own brand. We even looked at that. Um and then we started talking to like UFIT, and we looked at Planet Fitness, and then we looked at Crunch. Crunch is sexy, crunch is appealing, Crunch is just different, they were innovative, and we knew it was going somewhere. And when and we knew that they, in our opinion, they were just having the group fitness component, having the personal training component. We knew that that brand we had been watching Planet, but Planet was like, you know, I'm painting that wall, that color. You you got to have like this branding. And we wanted to partner with a brand that would follow the trend in HVLP, but it would it, it was that, but we didn't want to reinvent everything, right? We wanted to follow a brand that we believed in that had flexibility to grow with us. Um, and that was kind of part of my journey. That was a big step to why we chose Crunch and why we got out of more the mom and pop, because we we thought there was gonna be a day that I think we're here today, kind of seeing in the industry is that you have these, you know, these major brands that are out there that are really just taken off. You know, a lot of a lot more private equity. I know we're gonna talk about that later. I mean, there's 10 to 15 operators within the crunch brand now that have private equity. You saw what Planet's done. I mean, some of our recent competitors had some great funding, some great liquidity events. You know, there's a lot of focus on the the the the bigger brands right now.

Well, I think there's a lot of focus on the brands, but there's not a lot of media attention, um, at least within our industry, about what you guys are doing, right? The the holding companies, the operators, like the people who are, you know, doing it. They're actually building out the franchises bit by bit. And maybe talk about that like categorically, like where do you, where do you how would you describe where you guys sit within the industry? Yeah, as far as our geographic footprint, Eric, is that what you're no, just like if you look at like, okay, well, there's you know, there's brands, there's the franchise brands, right? There's the corporately owned lifetimes, right? And then there's there's you guys who own a bunch of gyms, right? Essentially. And I think a lot that's like a that's like an unspoken category or level within the industry that people because you guys are quietly operating, not in the news, right? You don't have big brand names because you're leveraging the big brand names, but you're actually the ones building out and operating and making these things super profitable. So yeah, tell tell me about what it's like to let to operate at that particular space.

I think it's great. But I also think it all depends on the franchise or too, you know, having that flexibility within the brand. Like, you know, the one thing that we do is, you know, a lot of HVLP brands out there, they might get a vi a lot of volume of business in there. But like what CR, what our company is known for within the Crunch brand is personal training. You know, like we we definitely focus on like the integration of the member, you know, get getting the actual member in into group fitness classes, getting them, you know, with a trainer. And it's one thing to fill the box, but it's another thing to really get serve people and serve your member base and get them results. And that's what this industry is about. Because at the end of the day, like HVLP, no matter who's out there, like all of our clubs are packed. And you know, that volume of people in there can be intimidating to that non-gym user, that deconditioned member that finally makes a choice. So, like we saw an opportunity in a window to do something great with personal training, and we took advantage of that. So it wasn't just about filling the box with members, it was about filling the box and really catering to every aspect of that deconditioned member to the regular gym user to the all the way to the bodybuilder. And you know, when you walk into a crunch or one of specifically one of our CR fitnesses, there's so many different avenues. And when people walk into a club that has that many options for fitness, it's like a big playground, right? It's like you can get they can get lost. So the ability to have a dynamic staff that knows how to integrate those members and to really use our product and maximize their workout is key.

Yeah, awesome. Well, I definitely at one point during this interview want to come back to the operational excellence that you guys pursue. I think that's really important, uh, really valuable for operators. And well, how big are you guys? Like how where are you guys sitting at right now?

Yeah, we just uh well, we're at 86 clubs. We just acquired uh nine 24 hour fitnesses in Florida, which it was an opportunity that we had come across, and it was a great partnership with 24 Hour Fitness, they're great people. So we jumped up nine. Our goal's been to build 12 to 15 clubs a year, and we're gonna finish this year with 24, ironically, because of the 24-hour acquisition. And you know, but I th I see our pace kind of picking up, you know, when you see the the lid of your, you know, or the capacity of your team, right? And what they can do. Um, we've always been comfortable. Like 12 to 15 clubs continue to grow out our markets. Like we were we were good with that. And then all of a sudden we pressed the limits with the acquisition and we saw how the team navigated through the day-to-day decisions and really be impressed at a higher level and have more work capacity than they ever had. And we're like, you know what? Now we can jump that up. Now we can do probably 20 clubs a year, you know, easily with the team. Um, it was it was good, it was a good uh testimony to our team. And so we currently we got 86 clubs open. Impressive man.

Let's start with this. How would you describe HVLP as a category and why do you think it's seeing so much success in the moment?

It's exactly what it is high value, low price. And I think that the the value proposition, the VP, is the the the most key component to what HVLP is going through.

Right.

The value proposition now, because there's other big players that are we're all making each other better. We're all looking for that next best thing, right? The HVLP when we got into Crunch, it was a 20,000 square foot box with group fitness. The workout floors were 8 to 12,000 square feet of actual equipment because we had we all for group fitness and even cycle and even some clubs, childcare, you know, and all those amenities take up additional space as you lay out a club. Now, you know, with with Vaza and Chews and Fitness Connection and all the big players that are out there, the 20,000 square foot boxes are gone. They're all now so the the that HVLP has kind of morphed into you know a 35 to 40, maybe even 50,000 square foot club now. Because the value proposition, because there's so much competition out there nowadays in this model that it's it's made us have to go do hot yoga studios. The rest and relaxation area went from two product offerings, now we have eight. You know, everybody's starting to build out either a female kind of area or a booty area. If we just added that to our thing, right? And and so that's 2,000 square feet. A hot yoda, hot yoga studios, 1,500 more square feet. The RR went from 800 square feet up to 2,000 square foot. So it's forced us to all get a bigger product, and it's it's also forced us to become not just better at what we do, but have a better product offering. If anything, we've taken a little bit of the boutiques, you know, and you know, Eric, we've talked about this, but like we just added Pilates with reformers. Um, and it's gonna be at a discounted rate, about a third of the prices a boutique would have. So when you have hot yoga, you have hit zone classes, you have all these amenities, HVLP is really like your, it's like your shopping mall of fitness. It's got a little bit of everything that everybody else has.

Yeah, it was it's something that I realized probably three or four years into my industry career was like, I will never bet against health clubs, especially that category. And back then it didn't have a name. We didn't call it HVLP yet, right? That was something I feel like came along later. I'm like, just just the sheer ability to strategically look at consumer trends in our industry and wait a little bit. Like you don't have to be to the forefront, like you can see like Pilates as a as a as a thing, and then be like jump on it right away. You could wait four or five years and be like, well, let's see if it trends in or out, right? And then if it if this is here to stay, then cool, we'll take it in-house. That's a huge strategic advantage over everything else because between you know, we have X, you know, 2,000 square feet, right? If you're lucky, maybe you got to optimize that space and you got to have the coolest, most sticky thing in there. And that's a very difficult thing to do. So it's that's I've always seen that as a unique advantage. I mean, is that something that you guys articulate within your within your four walls, or is that just something that's kind of known across the HVLP world?

Yeah, I mean, I think like boutiques still are the best at what they do. Like you go in, there's a more personalized experience, whether you're Barry's boot camp, but I love living our our you know, the fitness industry period. So I'm always trying boutiques. I'm trying, you know, the cycle cycle bar, the you name it. And you know, I'm not saying that you you go into those type of experiences, they're calling you by the first name, you know what I mean? Like it's a community, they're writing your name on a water bottle, they might have your name on a you know, on a locker, a personalized locker. And I'm not saying we give that level of experience because we have the offering, we have the classes, we try to maintain, but it's a more personalized touch than the boutique still, which is why, in my opinion, they can charge a little bit more. But the ability to have to come into you know, discount fitness and to have that ability to do whatever you want to do than all those other boutiques, because let's face it, like if you're a member of a boutique, you're paying 150 plus a month for a boutique to where you could pay, like at Crunch, 29 a month, and you get that full product offering of all the classes, hot yoga, hot classes, RR, hit zone classes, you know, which is a CrossFit kind of like workout, all for 29 bucks a month. So it's almost a little bit more recession proof, in my opinion, if we were to go through like we saw it coming out of COVID. And the other thing, the other trend that we're seeing right now is you know, it's funny, it's they'll cancel a boutique, but they won't cancel, you know, the HVLP member won't cancel their membership during the time of it's starting to turn. We saw that coming out of COVID. And a matter of fact, they're members of multiple HVLP gyms. I see that more than ever. Like, oh yeah, I'm a member of EOS and your club because I like this piece of equipment there or this piece of equipment there. And uh or I just like the environment, my one buddy goes there and my one so they they might have two or three memberships at that lower price, but they're not gonna have as many boutique memberships as they might have an HVLP membership.

Interesting, man. Let's talk about private equity, Tony. I think that's something that uh the industry, you know, I cover it in my quarterly reports with uh Alex and Juliet. We we get into like what that means for the industry. And Edward Hertzman and I had Pete Moore on the Athletic unscripted. I don't know when that's going to come out, if it's before or after this, but we talked about what private equity, these large names, Leonard Freeman, a bunch of other different ones, right? What these players bunch of. So tell me what's going on in the private equity world and what and why we should be paying attention to that.

I th I think everybody should pay attention to it because it's there's more private equity in crunch than there's ever been. And you're seeing in multiple different brands, right? And there's definitely eyes on the HVLP market, right? And when you when you when you do that, what's gonna happen is it's gonna speed up the growth of any of those brands, right? Like private equity comes in, they infuse money into you know what whatever that the smaller group might be working, whether you're under a franchise or a bigger independent brand, and their growth will speed up, um, which is in return going to be a larger footprint. You're gonna see more clubs, you're gonna see it, you're gonna see these massive names, and it's it's going on at a level that I've never seen it go on. Planet was really the first pioneers of doing that, right? You saw Planet and really, you know, a lot of these operators, you saw certain operators have 80, 90 clubs, and you're starting to see that. And there's there's several within Crunch, you know, several big operators, good operators that are starting to really scale because they got some serious capital behind.

Yeah, and I think this is uh you and I were talking, we were preparing for this, but there this is it's almost easily predictable to see what's gonna happen in the next five years in this space, right? Like the major brands are gonna accelerate. Maybe there's gonna be uh, I mean, obviously a lot of consolidation, but if you if you're gonna dust off a glass ball, magic ball here and kind of look into like year 2030, Tony, like what do you think all of this means? What are these trends gonna lead to?

Um, I think there's a couple trends going on. I think we're all competing for the same boxes. I say that all the time because the, you know, whether it's me or a competitor or whatever, like we're all just the only person that wins is landlord, right? We're all driving rents up. We all look for the same exact box with enough parking. So that's a trend. And when I when I think you say 2023, I think, oh my god, with my rent escalators, like, what's my rent going to be then? And you got to make that decision today, right? You know, so it's all in the niche.

Things to keep you up at night, right?

Yeah. I'm I'm like, I'm like, can we all just like give every other deal? Can we just like work this out to where we don't have to all be jockeying through the same exact piece of property? But the but the trend in itself, I think, you know, planet, you look at planet on New Year's Eve, right? New York City, ball drop, planet, national ad fund. I mean, they do it right, and they always have. And when I think about that, and I think about the Crunch brand, you know, you think about like following Planet, Crunch is just going past 500 clubs. And you think, like, if you were to talk to me three years ago, I would say, where's our brand marketing fund going that we contribute as a franchisee? I'd see a commercial here, a commercial here, and I'd be like, okay, great. And there was a point that we used to have to put fitness underneath the crunch fist on a building. And we had to do that because people would look at the crunch fist, everybody's like, You're in the industry, you would assume everybody knows what the crunch fist is, right? Yeah, everybody knows it. And it's like people would walk in, you know, here and then when we didn't put fitness, and they'd go, What is oh, it's a fitness center. I mean, we didn't know what crunch was. We didn't know if it was a serial box, right? And uh, like, no, we're not the serial box. And uh, so so then we so, but the days of having to put fitness under the crunch brand have kind of been swept to the side because of just getting 500 plus clubs now. So I think you know, from private equity to like what it's gonna look is, you know, for us for crunch fitness, like the brand recognition is really getting out there and the the brand marketing fund that we're contributing through corporate, there's a lot of big, there's a lot more clubs contributing to that. So I see us just scaling and people, more and more people knowing about you know, crunch fitness and any brand out there really as they start to scale.

Do you think that's gonna mean, you know, in a in a given period of time that we're basically gonna have like 10 major brands or so across the country where that that's like that's what you got. And like what is that I guess what I'm getting at, what does that mean for the independent operator? Like what should they be thinking right now? And you know, to set the table, you and I discussed this, and we talked about it on the podcast with P. Moore, who's got a great show, by the way, Halo Podcast. People should check it out. Like, if you're a independent health club operator, Or a regional operator, and someone knocks on your door, you know, whether they're Crunch or any other one, and they're like, hey, we want to buy you. What would you recommend?

We've done some door knocks. So yeah. Yeah. Those go one of two ways, right? Like, hey, we're going to build a club across the street from you. Would you rather sell? And I do think that it's the right time probably for a mom and pop to maybe look if a brand is coming into any given market and it's it's a superior brand or that brand, it works for that brand to acquire your product, I would say then yeah, they probably should sell because the bigger brands are gonna continue to cluster clubs. You know, it's it's like me going in Knoxville. I got one club there. Um, Knoxville's got lower demographics, but we we wanted to be in that market, it's our territory, but we're not gonna go in there with one club, we're gonna go in there with four, right? And I also think that like looking at you know, 2030 or down the road, too, like brands themselves, you try to get a brand that's ageless, in my opinion. So you you gotta uh there's a lot of trends. Like when I see the lights and everything and the neons and all this, and I'm like, when I started in the business at 18 in 1997, right? I I walked in to several brands, and like the group fitness studios had these weird neon lights, all the women had these full bodysuits with the high socks, and I'm like, and the high socks and the bodysuits coming back too, because the lights are definitely back. And so the industry, you know, itself in the fitness industry, you want a product that is timeless, in my opinion, so matter no matter what you do, because it goes in phases. And so as I as I see this industry evolving, we're all spending more money on clubs, we're all spending more money on the actual physical boxes. So it's going to be interesting. So, you know, if I was an independent owner or a boutique and I had the opportunity to roll up, then I probably would.

What's uh that's a really interesting thought. Like, what makes a brand timeless within our vertical? Like what are the qualities that you look for that identify something like that? Colors, or is it just a feeling?

A feeling, colors, right? Like you you built a house a couple years, you know, 10 years ago, terracotta was in, and then it went into grays, right? So colors is everything. When you say timeless, timeless it always changes, right? And the lighting, I think about that with our lighting. Everybody's doing like blue, black, ground lighting on the back of their mirrors and all that kind of stuff. And I'm like, should we just do white and say neutral, but have the backlit mirrors? Something like that was a discussion about does that is that a little bit more timeless compared to you know this blue trend or the the the neon colors and all that. So it's but again, I think even with a brand, Crunch has been through 1.0, 2.0, and 3.0. So since they've had three changes to colors and looks of the club since I've been a part of the brand. So even if you're not timeless, I think you just got to be willing to commit to convert your clubs to a newer brand or maybe what the market is calling for, what what the members are used to seeing, because change is good sometimes.

Yeah. I mean, I remember the first time I joined a crunch, it was I was I was in my 20s. I was living in San Francisco and I couldn't afford the bay club yet. So I went to Crunch because it was down the street and uh on the embarcadero, I believe. It was great. I'm like, this is I'm like, this is an incredible value. It was like 20 bucks a month and had everything I wanted. It didn't have, you know, the basketball court that the Bay Club has, or you know, this beautiful pool that they have. But I'm like, this really solves my needs. And it was branding was almost the same. It was the same logo, right? With the everyone knows the crunch logo, and the colorings were the same. And it was like like it, it had it has it hasn't changed a whole lot over 20 plus years. It's it's pretty incredible. It's pretty same, it's it's got staying power.

Pretty cool. Yeah.

Yeah. What do you say for so we talk about the mom and pops, but for the industry as far as like you know, maybe the mid-tier HVLPs, like the the regional ones or ones that are, you know, not quite in the the top 10 that we all know. Like, what do you think is gonna happen with those? Are they gonna get consumed into the the major top 10 brands?

You know, I you know, we all kind of mid-price point tier, I think, has a there's a place for them. You know, there's some really good operators out there, one life, mountainside, right? They're in that mid-life for you know, 45 to 55 or mid-price point tier. And I think a lot of times, if I was to give advice to anybody out there, like my opinion is that's a good price point for those brands. And when they start to really try to morph and try to become, or any operator thinks that just lowering your price or changing your product to something else is you start to lose your identity. And to me, I think that's scary. I think that HVLP, even that all of us big operators, there's a price that people will pay for maybe a little bit less people and a little bit different of an experience, right? You go into one of our clubs at night. I mean, the music's loud. I say if you're not if you're not getting complaints and the music's not loud enough, right? Like I don't I don't want that country club experience. I want to, I want people to come into one of our clubs and and and feel the rhythm, like almost going into a nightclub. Like, I want we don't want to be stagnant, we're crunched, right? You gotta be edgy, you you gotta be, you gotta, you gotta make it like a nightclub is the easiest way, you know. And I think that with those other people, you know, as the people that have come up in the industry that want a little bit more, you know, a little bit less people. They want to be able to get on their piece of machine and they're willing to pay a price. So I think HBLP is gonna open up the doors for those mid-price point tier, you know, you know, health clubs that are out there. Eventually they're gonna get the person that doesn't want to deal with the overcrowdedness and it's gonna be a good feeder system for them. And then I also think there's that high price point health club that, you know, like I think lifetime they we all can say that they do probably the best in the business, right? Like, and but the the value proposition is there at a very high level, you know, and just don't have your wife put the credit card on file. It's now she'll spend it off the spa and everything else that they upcharge you for. You know, so but yeah, so I think like I think just don't change on who you are, don't try to be the minute you start focusing on price or or what you know somebody else has to offer or you try to change to become like what they are, your products broke. And I think that there is and there's like great products out there. Like I I like a lot of products. I like LA fitness, I like 24-hour fitnesses. I think I think they all serve a certain piece of the business. And look, coming out of COVID, the the biggest thing that we saw, and everybody saw this, you saw the trend just spike. And it was because people were scared about getting sick, right? And they wanted to make healthier lifestyles. And, you know, there's a lot of industry stats that say like 22 to 24 percent or something in there belongs to a community, you know, belongs to a health club. That number is much higher now. I would, I would, I would, I would guess that it's probably six to eight percent higher. I would, I would say it's somewhere in the upper 20s of the members that actually belong to a health club just after COVID. So there's more customers that we've than we've ever had in the fitness industry that are out in the community, but there's still 70% that don't belong to a health club. So there's room for more competitors, period. And I think that if we all just focused on not the people that are using the actual gyms and focused on what planet was so great at, focused on that deconditioned member, you know, the 70% of any given community that has never stepped foot into a health club, right? And how do we get them in?

Yeah, I mean, that's the age-old question. How do we get to that other 80, 70, whatever you, whatever the number is, the other percentage, right? Yeah, whatever it is. We were talking about it forever, and uh I don't know. You know, I was I had some different conversations recently with like, you know, what do we do for public health and who do we focus on? But I'm starting to settle on is like, well, maybe we just this is sad to say, let's just focus on the youth. Let's just kind of let this generation go, right? Let's let's focus on the youth and just see like get them early on, right? With the physical education in the schools and you know, physical literacy and you know, maybe some basic like understanding of nutrition and things like that. If we can do that now, then we have a bright future. But like trying to change human behavior at the ages of like 45 plus is not an easy thing. I've tried to do it for many, many years. I'm sure you have to, but anyway, that's a little bit of a side note, but that was just something that's on my mind.

We just got to teach them gym etiquette. That's the only thing. Focus on the youth, get them in the gyms. I'm all about it. But like the days of gym etiquette, I think went out of the door years ago.

So it's like I so I go to the wave, I always shout them out. They're uh kind of our health club here in in Whitefish, Montana. And uh my wife made me promise I wouldn't coach people I don't know because I'll go into the weight room, and sometimes I have to. I'm like, guys, like you know, 14-year-old boys, like you guys, you're doing something real dumb right now. Like, I need to, you know, and just like and and sitting on the the platforms and just stretching on it when someone wants to you like there's little things that drive me bananas, but I think you're right. Like, I don't know where Gym Medicette is gone or why it's gone, but it would be nice to have something in place where maybe we can teach people. I don't know. That's a whole nother podcast.

You Tony, you know, Eric, the other day I was I was I still teach sales school. Uh, when people ask me what keeps you up at night, it's that it's your new hires, it's the next generation of people that are working in your clubs. And as a CEO, I stay very connected with all onboarding, show up, teach. And, you know, it's funny, this next generation, you know, a lot of us got into the industry and we knew the basics of, you know, what it took to burn a calorie or or what circuit training was. And I was given new higher training and I had about 40, 50 people in the room, and I mentioned circuit training, and I said, uh, how many of you guys could describe what circuit training is? And nobody could raise their hand. And I thought, I've never realized that the people that are working in the gym nowadays aren't getting into the gym because they have a passion for fitness, they're taking it because it's a job. And these are the people at the front desk. And it used to be, I don't know, there's a lot of us in the industry that when you got into the gym industry, you were doing the actually intro sessions, whether you were qualified or not. You were doing the measurements, you were doing the whole intro, even if you were a sales associate or in operations. And so we recently have had a shift with that, right? And we have had a shift and a focus to make people more fitness professionals, no matter who you are. Um, and it's actually we we completely changed in the last 60 days our onboarding experience for our new hire because of that. Gave them a lot more fitness knowledge, even if they're at the front desk, make sure that they weren't too. And of course, we've always had them go through an introductory training session with one of our trainers, but actually teach them the basics of fitness and get them connected. That way it's just not a job because it's a cool gym job or something like that, because there's a disconnect over the last 10 years, in my opinion, of what that, you know, of that trend that I'm seeing.

I love that you guys are doing that. Well, that that's a really nice segue into what I think the next major topic is. And this is an opportunity for a not so humble brag on your part, Tony, but like what makes you guys so good? Like, what is the operational excellence? What amount what allows you guys to scale? Like you're talking about 20 plus a year, you know, the the workload that your team's able to handle and do it effectively, right? And and open really great clubs that are highly profitable. I mean, $120,000 a month with some of your clubs, I think was a number that we discussed. So, yeah, what is it? Like, what are what do you guys focus on? What are the pillars of success for your guys in your operation?

We talk about humility and mutual respect, are two of our major pillars within our company. And humility is you got to be humble enough to do anything. I always tell people the day that you say that something is not your job is the day that it's no longer your job. You hit the door. Everybody does everything. And if you can manifest kind of like that experience, like that is so key. You know, today you have so many people that are clockwatchers, you have so many people, and you don't want to force them to, hey, it work those extra hours. But if you as a company or an operator can kind of build an environment to where people fall in love with their job and they stay extra hours, then you're winning, right? That's culture ultimately. The one thing about that is this is my like, I don't have an office. Everybody tells me to get an office. I actually, this is my temporary office. And I don't have to be a little bit more.

It looks like a temporary office.

We talk about that. If you're, you know, within our company, like what makes CR so great is there's not an employee that doesn't know me, like you know, from the top down. And that goes to our COO, our VP of sales. We don't live in an office, we don't make decisions that are from an office, like we are constantly in the field at our own sacrifice because we all know that when you get higher up, you have a certain amount of administrative roles that you got to do or desk time that you got to have. And but we literally force our team to to travel, our executives, to be seen in the clubs, to live our product. And I think ultimately that what that's what makes CR. And you know, we want to we want to be the best in the industry, and we don't know what that even is. Like everybody beats their chest, like, hey, we got the best brand or we got the best team, but do you really? Right. And you know, if you if you have that ability to influence tons of people in multiple different markets, I mean we got 86 clubs now. So how do you do that? One thing that we talk about, meet with people in numbers. If any executives travel to a market, like meet with them in numbers rather than impacting a one-on-one, have a group and pull everybody together, have a team outing, have a team, you know, have a team training for two hours, have a breakfast of champions, right? And those are just some of the tactics at CR. As far as like leveraging the brand or the fitness brand, our personal training play is one of the something that we're known for. And you know, the average club across the board is 128,000, you know that stat, but that doesn't happen with ease. It happens again with the culture, the right people, the right leadership driving it. And again, though, too, like we don't just drive personal training for a revenue standpoint, we drive it because you're truly getting your member-based results. And the longevity, no matter what business in, is if you start if you get people to use your product in the right way and benefit from it, people aren't as loyal to brands anymore. They'll just leave. But if you're getting them results, results and they have your attrition's gonna go down, you're gonna have less cancellations, and every proven fact shows that anybody working with a trainer has had you know that their longevity of being a member is twice as long. So, well, about a third long, actually. But so, like there's a lot of thought process through that entire thing, but we want to be known as that. We make all of our trainers sell their own training, which a lot of people don't do that. A lot of times, like you a lot of companies will sell personal training and then they'll pass it to another trainer. You have a master sales head trainer. We don't believe in that because we just feel as though like we want people to buy with the person that they want to train with. And you know, that proves out too. So it's all those little games of inches that makes I think CR fitness so great.

The uh the personal training thing is super interesting to me because I've I've always I've felt that over the last decade or so that personal training isn't the admired occupation that maybe it once was. Like people don't seek it out and think, like, hey, I'm gonna make a career out of personal training or small group training, and I'm really gonna dive into the role of the trainer and the coach. And it worries me a little bit. So when you guys are bringing in talent for personal trainers, like where do you go to find them now? Where do you go to find really good personal trainers and what's the training like? Because I feel that you know, most get into it with a love of you know, the physiology and the anatomy and the the you know, the programming doesn't the program designs and all those things, right? But like the sales aspect is they just tend to not really enjoy it too much. So yeah, how how do you how do you develop that pipeline of trainers? I guess is the question I have.

You know, there's two thought processes on that, right? Like we believe in growing them, right? So like our education that we give, we do we have not only we have a nationally recognized certification that we do in-house, right? So we we get our people certified, but our continued education is really where it's at to give people the level of comfort that have never trained before, right? Because everybody thinks they're a trainer nowadays. I mean, look at Instagram, like everybody's got a tripod in the gym and they're video in their own workouts, right? Doesn't mean they're certified or even really know what they're doing. But we we have taken the approach of, and then you know, when you get a really good trainer that kind of swayed here, uh, when you get a really good trainer, they get confident enough to think that they could do it on their own. They just go do it at a park or they go somewhere else or they work for another gym or they open up their own boutique. And so we believe in growing our trainers. We'd rather have somebody green that wants to get into the industry that maybe has never trained before, and then invest in onboarding them and showing them and teaching them how to train. And again, the longevity of that actual employee would be twice the bandwidth.

How much? Um, I know it's different per market, but how much do you think a personal trainer can expect to make nowadays?

So when we designed our personal training pay, we that was a big debate, right? Like, and we're like, we charge on the upper end of personal training to our members. And the reason that we do that is because we wanted we wanted to create trainers that were the best in the business, but we also wanted to get them paid. We didn't want the trainer mentality to come in. Our trainers, we have many 20 to 25 percent of our trainers make over 100,000 a year. So the days, if you were to rewind 15, that wasn't the way it was, right? So like people would look at a training job as maybe maybe they're a fireman and maybe they did it from a part-time to kind of supplement their income, or maybe they had another business, right? Or maybe they just love training and did it part-time or the stay-at-home mom. Well, what we did is we said we can't pay our trainers, you know, 12 bucks an hour or 12 bucks a session or 18 bucks a session. And we want them to have, we want trainers that have the career mentality that they can do this for a living. So that's what we did. That was that was a major, and we don't do any part-time trainers.

Oh, that's great. That's awesome. And then the actual, I know you guys do a lot of technabled services as well, like in the personal training. And so maybe talk about like what is the personal training experience like from the member experience from hey, being first aware that maybe personal training is an option for me. That's that's viable to the sales process to the to the experience ongoing for for those particular clients.

Yeah. So we actually it it's funny, we engage, and a lot of people would just give that introductory free session, right? And that's not what CR Fitness does. We found that if people didn't pay for it, they wouldn't show up to that initial appointment because there was no value that was created. So we actually charge them 10 bucks at the point of sale. So they actually have to buy that from the when they buy their membership. And with that being said, we saw our show ratio show up that 50% more of the people showed up because they had already invested in themselves, even though it was only 10 bucks, they were getting an $80 session for $10. And therefore they were they were showing up. And that was one of the key components. But you know, the whole thing is when you get that person that shows up, the first thing we do obviously is a full assessment. And you know, there's there's a couple different people out there, right? That everybody's got different needs. And, you know, like me, I I don't want to know that my form's bad, and I don't want to, I don't, I don't, I don't want to know that I'm doing an exercise wrong. If I was to say, like, who could sell me training? I want somebody to show up and get rid of my supercomputer, make me forget about my CEO life for one hour. I don't want to be told what's wrong. I want somebody to give me an experience, and that's just me, right? If I could forget about the like the price that I would pay to forget about all the things that hit my plate and to walk out with a sweat for one hour, that'd be huge to me, right? And so that's that's just I'm probably 10% of the people out there. Then you have the intimidating member, right? And then you have so I think it all starts with that initial needs assessment, which we do right from the intro. We sit down, we break down exactly what that person goals are, who they are, why they got into fitness. And that first step is key. You know, the actual first session, it's not like they're training for a full hour. I mean, I would say that probably the practical part of it is 20, 20, 30 minutes max. It's really about getting getting a level of comfort with that person that they can guide them through the 40,000 square foot gym that we have and show them how that they can utilize and get to their fitness goals, whatever it may be. And again, like everybody's different. So that that's the experience that we try to cater to. Like, you know, we have an environment that we want to cater to everybody, with an exception of the music being loud. No, I'm kidding. But uh, you know, I I think it's about delivering exactly what people want, and that that's what people expect, and that's why our training does so well.

Yeah, awesome, man. Well, uh give me some insights, like what's what's the near future look like for you guys? You got you got some money in your pocket? You got what what what what's what's going on?

Yeah, we're we're currently, you know, like every major company, you know, we're raising capital every four to five years, and you know, and that fuels our growth. And our company is hitting on all cylinders more than it ever has, which is a really good feeling. And you look at that from financially, culturally, you know, all the way around. And you know, that I'm very bullish on the future for CR fitness. And if you were to tell me a couple years ago that we would have bought off the Dallas territory, I would have said, I've never been to Dallas, I don't even know what that is. Outside the cowboys and cowboy hats and rodeos, I don't know what's in Dallas, but we did it. And that was something two years ago that wasn't even on my mind. And then we recently purchased Phoenix. Uh, you know, Phoenix is known as a, you know, some people say it's underserved, some people say it's too competitive. I look at it like a phenomenal market right now. So far CR fitness, we're gonna start to go into Phoenix. Uh, we're gonna go in there pretty aggressive with a with a lot of clubs right off the bat. Um, we're gonna continue to explore and build out Dallas, always looking for acquisitions. You know, I knock on every competitor's door, try to make friends with them. I think a big thing, a dying thing in the industry, and I learned this from my partner, Jeff Dyer, but like I went to Club Solutions Summit. I went to, you know, CanFit, which is in Canada, you know, and I try to meet anybody that's in the industry. And that was something that, you know, 10 or 15 years ago, you know, there's a new legacy of people that are coming up through the industry. And I don't think you should ever fear your competition or fear, you know, anybody that's in the industry, like go up and shake their hand and make a friend. There's no industry secrets nowadays, there's no special piece of equipment that's exclusive with one club. So I think there's no reason to ever feel that. And there's enough market share for any brand that's out there if you run that brand right. So, as far as CR fitness, I can't tell you like I didn't, like I was saying, I didn't know. going to be in Dallas or Phoenix. I can't tell you where we're going. I can tell you that we're very bullish on the future and we're looking at every opportunity across the United States.

Yeah. Well you know I think you nailed something. If I could wave a magic wand over this industry, I would have what you're just talking about like less of a I mean there's always got to be competition healthy.

Right.

Yeah. You got to have that. This is this is it's it's on top of capitalism, right? Yeah. It's amazing. But we we have this void of leadership, right? Where it's like, you know, Eddie made a great point of like if, you know, back in the day, if there was a problem with the automotive industry, like Lee Iacoka's on a plane to Washington, DC, right? Like you we don't I don't know who in our industry from a major you know executive level or people who have a lot of sway over the industry, like who's pulling together and looking after the industry overall. And you know being out there and and you know making sure that you know we're we're opening new doors, we're getting legislation. I mean people are fighting for legislation, but we've just seen it's just it's it's tough. Right. But I feel like we need kind of captains of the industry really to step up and say hey we're the leaders and this is you know directions that we can go if we pull together like tariffs is a great example, right? Like, you know, how are we coordinating on tariffs? Like what's our strategy as an industry? And I feel like that's something we need. I don't know who's going to step up and do it, but I would love to see it.

Yeah I'd love to be a part of it. I think I'd like to see more people at these industry conventions meeting each other. Round tables are key. Right. Like like sharing best practices.

Yeah well there there seems to be I mean I you just never see the the big the big big guys right or women like the ones that like you know who never show up to any of these industry events never you know accept invitations to anything like every once in a while just like come on yeah come be part of the group right we're okay. Show up show up I don't know maybe they're listening to this maybe they're not let me ask this last question Tony is like if you and I are at one of these industry events and we're meeting new people and uh it's 2030 I'll put that number out there and you and I are having a beer and you're like dude we crushed it like we're hitting every single goal. What would have needed to happen in that year of 2030?

I think you know you got to be all gas. You know that's you got to be on every aspect of your business. And too many times I think that over the next four to five or six years I think the the most key thing for any operator is to be inside your four walls right the days of absentee ownership and the days of these brands and be willing to put some capex expense into your your clubs that are starting to age you know because all of us that are building anybody can build 20 new shiny clubs right and then you got another 20 or 30 clubs behind that that you built maybe over 10 years ago. And you got to be willing to reinvest into those clubs. You got to be really willing to bring them up to the standard that you of the current product that you have right kind of like the timeless thing. And I think there's going to be huge separation in the operators that really continue to reinvest in their core clubs, right? They're clubs that are 24 months and older as we describe it. And if you were to tell me like what it what are we going to do right? Well we have leases that are coming up on some of our our leak, you know, our original clubs and we're either we're looking to relocate double the size or just completely you know move you know completely renovate the club and bring it up to like our 3.0 standard. And I think us sitting down that's going to be the difference with CR fitness that's going to be the difference with Crunch if we're we're sitting there and we're having a beer and we're talking about like what we did it won't be the new clubs will be easy. Like yeah we signed the triple A site we knocked the cover off the ball with the pre-sale the club's beautiful it's up to you know current technology standards are up to top point. But if we can be successful in our original core clubs or all the clubs that we built over the last five or 10 years ago and bring those up to a standard that's what will position anybody out there in the fitness industry up top. And it's it's a fine line right because you know you can't just throw tons of money at everything.

Wish you could I certainly can't well I I lied one more question I'll let you get on to CEOing here Tony but what like what what do you what do you need help with as an industry is listening to this and they're like you know what are what the major challenges that you're facing and people are going to reach out what would you want to hear from them about and then how would you like them to reach out to you?

You know I would I would say just going back I think that we should all make each other better. And I think that you know there's no industry secrets and I think that the the dialogue amongst each other and I've made a big point to to to network over the last year and a half and it's paid dividends. There's people out there like Bill from TSI like I I could give him a call today you know consider him a friend. And you know I didn't have that relationship a couple years ago. I would say that like if as we look at obesity at an all-time high right in America and as we know that you know people are more health conscious than ever I think if we all just came together and really started to target that deconditioned member and started to focus on that as a team I think we would all have more market share. We would all have bigger benefits you know long term. And you know you know brands will come and go you know brands will come and go you know trends will come and go, right? But the people that are in this industry, the good people that are in this industry, they're good at what they do and you don't know what your competitor is doing until you shake their hand.

Yeah well said that's perfect. We'll leave it right there. Well Tony thank you so much for joining me I'd love to have you back on in another year or so and just get an update on everything you guys are doing. And uh yeah I think this is absolutely value packed. You you brought the heat.

So thank you ladies and gentlemen Tony Skarmalli thank you guys hey wait don't leave yet this is your host Eric Malzone and I hope you enjoyed this episode of Future of Minace. 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 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 and 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 futurofitness dot 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