The Mag
Please join me in welcoming to the broadcast CEO with Workout Anytime Mr. Mark de Gorter. Good afternoon, sir.
Mark de Gorter
Well, thank you, guys. Thanks for inviting me on.
The Mag
Well, Mark, before we get too far into things tell us about Workout Anytime. How are you serving folks?
Mark de Gorter
We have 175 franchise clubs across the country. We're located predominantly here in the southeast and we've grown concentrically outward into Kentucky, Tennessee, the Carolinas, Florida, Alabama, and Texas as recently as last year, we have made great inroads there we go as far northeast as Portland, Maine, and as far northwest as Portland, Oregon. And again, looking for opportunities as we kind of expand throughout the country beginning here and in Georgia.
The Mag
Now, what's the offering to the consumer? What what's the workout anytime experience like?
Mark de Gorter
Yeah, we're part of what they call the HV LP segment, which stands for a high-value low price. So, we occupy that sub $30 a month dues rate. And what's really exciting about this, this regular business is back when I got in the industry, gosh, 30 years ago, the product that you would get that we're offering would be upwards of 50, 60, $70 a month. Now what's happened now is this particular segment because of the very strong price-value relationship has just done very, very successful. In fact, it's in the last reported research by the USA group, which is our industry trade association, our segment grew 69% compared to about 30% for the higher-end boutiques and only about 2% for those mid-market guys.
So, there's the consumers are getting behind it, they're recognizing that you don't have to pay a lot of money for basic gym access. And we're filling that need with somewhat we like to call the best pound for pound workout in the industry we just provide fitness we just provide results we kind of position ourselves as a results-oriented fitness facility as opposed to some of our other competitors that are more along the lines of inclusion.
And you know that type of approach. We believe people work out and embark on a fitness journey because they want to get results and we really push that but we don't do the things that end up costing clubs a lot of money but don't really deliver consumer benefits or example, saunas and pools and daycare centers and those things that are perceived as being important but at the end of the day when you really get down to it take up a lot of space and don't eat that much. So, we don't really focus on that we just outfit a 6500 to 8000 square foot facility with about half a million dollars in fitness equipment. And by doing so we've got a great value for a member
The Mag
Now has the member kind of profile changed over time? Because I would think that in today's market you have you know some people are attracted to kind of these boutiques, high-intensity workouts, very specific workouts whether it be spin or Pilates or you know just really even rowing now I saw a club that's only rowing like the insane to me, but there's somebody out there doing that. And there's so much competition with the home you know home gym stuff that's becoming more popular. How do you kind of fit into the marketplace?
Mark de Gorter
Well, you're absolutely right about that. Actually, I'll answer the question by saying yes or no and I'll say no in that. You know over the years, gosh, going back to the 70s you know the staples in the business work, free weights, cardiovascular equipment like treadmills and bikes, and what we call selectorized equipment which are machines that you put the pin in, and some other form of something back in the 70s 80s. It was jazzercise and then it became a little bit dance and then it became funk aerobics, step aerobics, and TR racks and Zumba and really as those programs have evolved over time, the one constant has been, you know, progressive resistance exercise, cardiovascular and free weights.
And that's part of the reason part of the reason behind that is consumers are always looking for something new to shake up their fitness regimen. But our staple business has really been in place for 15 years. And we expect that to be for another 50 years. Now, having said that, you're exactly right. What's happened now is, is the industry went through a huge boom in the 80s, where, you know, I was a young man, then and it kind of led my generation led that, and here we are now, you know, coming into 2020, my generation is on the other end of the continuum. But everybody behind us is also working out. Whereas when I was younger, certain My dad was not a member of a gym, nor were a lot of people that were older than me. So, what's happened is you've got a broader base of people that have embraced exercise, as a lifestyle. So, you have more people in the category than ever before. And then each of them, you know, wanting to do something a little bit different, I certainly work out differently today than in my 20s. And what we're seeing is this, this movement to kind of a basket collection of fitness, whether it be spinning or CrossFit, or orange theory or other hip programs, has really been driven by the millennials, who are looking to not really commit themselves to one gym, at the absence of other things that they like to do, they like to do different types of activities.
And that really benefits us because at the low price offering that we are, we can they can fit us into their share of wallet, if you will, of fitness concepts and still get you to know the different things that they're looking for, along with the more traditional exercise programs that we offer. Nothing that's really interesting. And we've seen the industry move from about 15% participation of Americans that really was in place for decades to most recently moving up to 20%. Part of that is what I just explained. But the other part is with the way the health care system is going in the United States, it's forcing people to take more responsibility for their health. And one of the ways to do that is to lower your premiums.
And the only way to do that is by increasing your deductible, meaning you don't use the medical system quite as much. And the only way you can do that, of course, is to stay healthy. So, there's a lot of things that are moving. And again, to continue on that side, which you mentioned, which is movement in the home, the advent of the replication of a group exercise environment at home, through new concepts like peloton or mirror tonal.
That's really exploded. And that's been really a product of kind of advancements in artificial intelligence and different types of digital applications, which have allowed people to get a boutique or studio type experience in a solitary environment. So that's a pretty interesting time to be in our business. There's a lot of different things that are driving it. And you know, we like to say that we're pretty simple we just provide a gym, we keep things simple, we provide a great experience for a low price and help our members on a results-based journey to get in the best shape of their life.
The Mag
Well, I think that that's a key differentiator that you care that your member gets results because a lot of gyms at least back in the day, cared more about getting members than they did have the members actually using the gym. So, do you put things in place using technology that helps the gym member kind of get the most out of their membership? Because you are you're what you're offering is an affordable way to get the foundational exercise that a person needs and if they want to spice it up with one of these boutiques are high intensity, they have that ability to because you're offering so affordable.
Mark de Gorter
Right? And we see that happening all the time. We've many of our members are members of multiple facilities. In fact, the industry large 25% of health club members are now members of multiple facilities. And of course, as I mentioned a moment ago, we enjoy that because we can provide that. But from a technology standpoint, you're right it's interesting, you know, traditionally clubs have really just looked at what their acquisition numbers were. And they weren't necessarily focused a whole lot on retention because people just kept coming in the front door and there's always been a certain amount of churn or cancellations that have taken place in the industry. And along came the recession in 2006 2007.
And clubs started realizing that people were coming in the front door, but they hadn't done a whole lot to protect the back door through retention programs. They really started to suffer. You know we place an equal emphasis on no. acquisition by providing a nice safe clean club and retention. As a matter of fact, it's two sides of the same coin is the technology that we have been using is a member satisfaction platform that's called Amex NEM. It's a program that some of the biggest brands in the world news from Apple to Mercedes Benz to help airlines and more seasons. And that allows us to measure our member satisfaction levels using things like Net Promoter scores in the light.
And we've seen a direct correlation in the clubs in our system that have very high member satisfaction scores, as reported through that platform, and low cancellation rates. And, and we really, again, that becomes a very critical part of our business. And we spend a lot of time making sure that if our members are being surveyed, they're giving us back some concerns, they were very quick to address those concerns.
And what we found is not the times you can take a negative situation and turn it into a positive, just by empathizing with the member’s concerns and addressing them. And in most cases, they're valid, we get right on top of it. So, it's kind of an under the hood technology, if you will, on the front end. Yeah, we're, you know, we're a smaller gym with a lower price point. So, we've always been looking at ways in which we can optimize the labor part of our business. And I don't mean by shortchanging our members and losing that touch. But for example, we're experimenting now with guided workouts, in the clubs using visual screens, from primarily for those periods of time when our clubs are not staff that works 24-hour gym.
So, providing a service, which is you know, a follow-along group exercise class on a digital screen, that can take place at two o'clock in the morning. For those members that are using the gym at that time, and what they want is that additional benefit, you don't want to just serve the members that can use our gym during normal business hours. We also want to use technology to provide a tremendous experience for our members that are using the club after our staff has gone home.
The Mag
Yeah, well, you almost have to win any time in your name. So, I would imagine that you're right, that's a good idea. So now let's talk about your franchisees. What do they look like? Are they fitness people? Are they people that have a portfolio of franchise brands, and they're adding you to their portfolio or these kinds of first-timers? Who do you have as a franchise right now,
Mark de Gorter
You know, it's really all of those, what we do is we break our typical franchise partner into what we call five different personas. And, you know, certainly, the top of the list are people from the health and fitness industry. Typically, it's a good strong number two person at a gym, who wants to be their own boss. And one of the benefits of our franchise model versus others in our space is we've got a lot lower cost of entry. Our franchise fees are pretty consistent, but our buildouts are quite a bit less. So, you can get into a workout anytime facility for a lot less than you could with some of our other competitors. So, the number two person, we provide affordable options for them to be their own boss.
Beyond that, we've kind of categorized our groups into what I call business 2.0 people, which could be that the guy that is at the end of his career with the cash in his Pepsi stock options, and you know, kind of give back to the community and be his own boss and then do that. We're seeing a lot of movement from the healthcare industry, particularly the rehab industry, physical therapists, and alike, and even beyond that more from the medical profession. And these people are looking at ways in which they can cover the care continuum to a much greater degree, they're certainly focused on the treatment side, and they want to get involved in the prevention side so that they can manage all of that for all the reasons I've mentioned a moment ago with respect to the healthcare industry.
So, we're seeing a lot of those people come into our space. As you mentioned, you know, serial entrepreneurs, you know, guys and gals that have just managed different types of businesses, and they roll us into their portfolio. And finally, the fifth group are multi-million people. Typically, from the quick-serve restaurant industry, that understands franchising, they've got an infrastructure that supports it. They're looking for maybe, an easier business to manage without quite so many moving parts as you wouldn't a restaurant. I can explain those differences here in a moment if you want, but they plug us into their infrastructure, their administrative and marketing infrastructure, and they know what they're doing.
So, we see a lot of that taking place too. So, I think that there really are no specific demographics. Lee, I think it's really, we look for people that enjoy being around other people, they've got a passion for helping people change their lives for the better. And those are the people regardless of what industry or what age they're from that seem to do the best in our network.
The Mag
Now, how, how was it at the beginning, were you at the beginning, when you're just getting started? And you have you're in the fitness industry, where there's lots and lots of competitors? How did you kind of get that escape velocity?
Mark de Gorter
I actually joined the company about four years ago. And we celebrated our 20th-anniversary last year. So, but going back to the very beginning, the two founders, Steve Strickland, and John Quattrocki started here in Atlanta, actually in Douglasville. And they basically built the club that was back in the day where the key card clubs were really kind of taken off. And they did the same thing. They offered a club that was open 24 hours for $24 a month. And it was incredibly successful. That club is located amongst some of the strongest competitive brands in the Atlanta market. And at the end of the first year, they had something like $800,000 in receivables, so they knew they were onto something.
So, they opened up some more clubs on their own and then realized that like many franchise stores, this is a concept that can be franchised. And they said about franchising, and they moved into Tennessee, and then they moved into other markets from there. I joined the company, as I said, four years ago, we had about 67 clubs, we're now up to 175 clubs with another almost 100 in the pipeline for build-out in the future. So, I think part of the reason why it's been successful is it's, it's a simple business to operate, it's not easy, you've got to, you've got to be willing to put the work in.
But when you think about it, very little of our, our business is cash-based. In fact, about 98% of our business was conducted, either through a credit card or a bank debit. So, you don't have the cash to worry about. There's really no inventory, unlike a restaurant or other types of retail outlets, it's got a very low labor component, relative to other gyms in our space. So, it was a very simple model to replicate. And our specialization really has been in smaller markets, we do very, very well and some of the markets that aren't the big suburban areas. As a matter of fact, when our development team brings me an idea from a prospect, and I don't recognize the market, I know it's probably gonna be.
The Mag
That's a good one, right? That you're like, nice works. That's exactly.
Mark de Gorter
Our best clubs in the country or markets, you've probably never heard of, like, you know, Morganton, North Carolina and Cookeville, Tennessee, and places like that. So, we do really well, because we look for hometown heroes in a local community, that's one of the differentiators between us and others is, we don't sell entire stage to private equity, we really believe that success of our concept is based on creating cheers like environment, in our clubs that are locally owned, or you'll see the owner walking through the club, many of our competitors, you just will never see the owner of the club at all. But we pride ourselves in the fact that we're locally owned, there's a higher degree of care and, and passion that's coming from those owners and in our business, we're talking about changing people's lives through results, that becomes a really important attribute for the owner of the facility.
The Mag
So personal accountability for the owner is just as important as to the member.
Mark de Gorter
Absolutely. And actually, we, we aggressively seek that out, you know, we really don't want people that are going to buy a franchise and hand the keys over to somebody else to run because you don't have that level of commitment. And fortunately, you know, we've been successful in finding those people in those smaller markets based on the personality I mentioned a moment ago, that is just fired up about you know, interacting with their members every day, they get to know them or their spouses, you know, where they work where their kids go to school when they go on vacation.
And that means a lot to our members because they don't just want to go into a gym, despite the fact you see people going in there and it could be at times of solitary experience with their headphones. They want to know that you're you care about them and that you're interested in their results. And those are the people that work best for us.
The Mag
Now, over the years has the level of support that you offer the kind of evolved, as well as this franchise, has grown.
Mark de Gorter
Naturally, I think it has in a couple of different areas first, you know, it's grown in that we've what we do as a franchisor and the relationship We create with our franchise partners is really kind of codependent. We like to say, you know, you're in business for yourself, but not by yourself. What I mean by that is, we provide kind of the overarching air cover surrounding what I call the four pillars, which is a unique and proven product, which we believe we have marketing that creates an emotional connection with the consumer, which we strive to do training that meets the member or the franchise partner where they want to be met.
And finally, the business system, that kind of connective tissue that gives them actionable information, like decisions, that really hasn't changed over the years, what has changed is the level of technology available to make some of that stuff more efficient. So, one of the biggest changes that we've seen over the last probably decade is the advent of more technology to do the job that paper and pencil have done traditionally. And we utilize all those tools from you know, managing and measuring our social media, to actually placing advertising locally through artificial intelligence engines that actually learn over time that the greater ROI is, for example, a combination of this ad on this platform and gets smarter that way.
Our CRM systems have become much more sophisticated in our ability to manage people through the entire sales, pipeline, and sales cycle. So, a lot of the same stuff, which is done now, you know, with technology, of course, we're dealing with mostly young people, as our associates who are absolutely comfortable with conducting business on a mobile phone or tablet and have no issues that affect paper and pencils performed to him. So, it allows our franchise partners at the enterprise level, to see what's going on in their gyms. And to manage that business from acquisition through attention right off of a laptop or a tablet if they want to. I think that's probably been the biggest, the biggest change at the end of the day, you're still touching people, you're still again interested in their results. It's all the under the hood stuff that just simplifies it or makes it more efficient that we're starting to see.
The Mag
So now what's the process for a potential franchisee? Who wants to learn more about the Workout Anytime business? What are the steps?
Mark de Gorter
So, assuming that they know about us, and like, like everybody, we spend money to reach those people that we believe would be ideal candidates for our business. Typically, what'll happen is they'll come to our website, which is www.workoutanytimefranchise.com/. There they can understand who we are, culturally, you know, the story of the business, maybe some of the industry information that will help them evaluate our concept versus perhaps others that they're looking at whether it be again, restaurants or homecare, the different types of options.
And then from there, they can start an application right there on the website, or they can call the number that's indicating the website and speak to any of our development professionals. And that's how the process begins. And what we'll typically do from there is, once a candidate has indicated, strong interest, we bring them into our offices here in Alpharetta, and we conduct the discovery day, we try and do those individually. Because again, we're very interested in establishing a relationship with a franchise partner.
These are 15-year franchise terms. So, it's a long marriage, and we want to make sure that we're right for them and they're right for us. So, we'll spend a day with them, getting to know them, getting to know who they are the kind of people they are their business goals and objectives, and show them some of our clubs. Then from there like everybody else, they'll go through a validation process where we'll introduce them to other franchisees, we'll let them select who they want to talk to, we really don't transfer money given away and over time, we found that in most cases, that usually results in a relationship with that candidate and then move from candidate to franchise partner.
The Mag
Good stuff Mark, thank you so much for sharing your story today.
Mark de Gorter
Thank you so much for having me. I really appreciate the opportunity to share the Workout Anytime story with you.
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