Why a $2.7M Studio Can't Franchise Its Best Trainer — Transcript

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1. 0:00Uh I have a dance school, two locations.
2. 0:02Wonderful. Uh we do 2.7 mil and and
3. 0:05thank you. I've been in five years in
4. 0:07business. So aiming for 3 mil this year
5. 0:10and at least 10 plus in the future.
6. 0:12Constraint will be space capacity
7. 0:15facility space
8. 0:16>> heard.
9. 0:17>> So yeah.
10. 0:18>> Okay.
11. 0:18>> What would you like to know?
12. 0:20>> Well, is that is that just what's
13. 0:21stopping you? Is just getting to the
14. 0:22location? I could do if I can get to
15. 0:25three million this year, I'll be at
16. 0:27probably 80% capacity running my core
17. 0:30programs.
18. 0:31>> Okay.
19. 0:31>> Right. Which is the key. Um I could add
20. 0:34daytime. There's things I could do on
21. 0:35the side, but it's not priority model.
22. 0:37Right.
23. 0:38>> So,
24. 0:39>> next step in scaling at that point is is
25. 0:42it additional locations or acquiring
26. 0:44dance studios.
27. 0:46>> I don't want to franchise. is I think
28. 0:47it's either acquiring studios that are
29. 0:49already that people want to retire from
30. 0:51and buy them out and run their their
31. 0:53businesses and then sell the whole thing
32. 0:55eventually or ground up organic build
33. 0:58from location.
34. 1:00>> So do you want
35. 1:03what you want to hear or the truth?
36. 1:06>> Both. No truth. I want the truth.
37. 1:08>> Do you want to exit? Yes. You said yeah.
38. 1:10So
39. 1:12>> and when you say okay what size exit?
40. 1:14>> At least 20 mil.
41. 1:15>> Yeah. So, the fun fact for everyone
42. 1:18here, the hardest amount of money to
43. 1:19sell for is between 10 and 30 million
44. 1:21>> because it's just not big enough for
45. 1:23people who have real money, and it's too
46. 1:24big for people who don't have real
47. 1:25money.
48. 1:26>> Interesting.
49. 1:27>> And so, uh, like it's easier to get like
50. 1:30a $100 million deal done than it is to
51. 1:32get a $25 million deal. $25 million deal
52. 1:34is like the the one of the hardest deals
53. 1:35to get done because it's somebody who
54. 1:37usually has a way bigger checkbook and
55. 1:38is just like really scraping down the
56. 1:40bottom and doesn't really care because
57. 1:42it barely moves the needle for them.
58. 1:43>> Interesting. Um,
59. 1:45>> just for context. Now that being said,
60. 1:47if you want to sell for more, the
61. 1:49difficulty of selling your particular
62. 1:51business is that it's so people driven.
63. 1:53It's so talent driven.
64. 1:55>> Um, and there haven't really been
65. 1:58to my to my standard
66. 2:01>> any super successful high servicebased
67. 2:04gym businesses. The closest one for a
68. 2:06period was Orange Theory and then they
69. 2:07went to during co and never
70. 2:08recovered. But like they were the
71. 2:10closest ones
72. 2:12>> and it's just because it's the talent.
73. 2:13It's just it's such a serviceheavy
74. 2:15business and it's so reliant on the
75. 2:17quality of the the trainers, coaches,
76. 2:18instructors, whatever you use the word
77. 2:20you use, right?
78. 2:21>> Um
79. 2:22>> so selling it will be difficult. You
80. 2:26would be able to sell it to somebody who
81. 2:27doesn't know what they're doing um for
82. 2:30sure, but you're not going to get a huge
83. 2:31amount of money for it. So some doctor
84. 2:33who has no idea about business but think
85. 2:34he does because he has money
86. 2:36>> um would buy it. Mhm.
87. 2:37>> Uh but you're probably like you might
88. 2:39get,
89. 2:40>> you know, it would be 10 with a bunch of
90. 2:42hair on it and earn, you know, clauses
91. 2:44and a bunch of crap.
92. 2:46>> So
93. 2:48if you wanted to just do this forever,
94. 2:49then I would say like just keep going.
95. 2:50That's amazing. That's fine.
96. 2:52>> Um but most people make this work in a
97. 2:56franchise model
98. 2:57>> typically. I think I mean you can get
99. 2:59gyms for free, studios for free like
100. 3:01that. Like that's that's not it won't be
101. 3:03hard for you to find, you know,
102. 3:05>> ballet, dance, etc. um locations because
103. 3:07so many people are in pain and don't
104. 3:09want to run them.
105. 3:10>> Like you could get them for free. I mean
106. 3:11that's how I expand like I got them for
107. 3:12free.
108. 3:13>> Um
109. 3:16>> so the good news is the business is
110. 3:18good.
111. 3:19>> It's just what is your expansion path?
112. 3:21So either M&A denovo meaning organic
113. 3:24growth you open it yourself
114. 3:26>> or you go from like a franchise path.
115. 3:28>> The franchise and or licensing um is for
116. 3:31sure more sellable than those ones. And
117. 3:34I don't normally give this um advice.
118. 3:37The issue is just that I I understand
119. 3:38the nature of the business obviously
120. 3:39pretty well.
121. 3:40>> Exactly.
122. 3:40>> Um they're very hard to sell
123. 3:42>> for a lot of money. You can offload them
124. 3:44really easily
125. 3:46>> because somebody else has a dream and
126. 3:47thinks that they're going to make it
127. 3:48work. It's like restaurants. Like you
128. 3:50can sell them for nothing because
129. 3:51somebody else has is a cook and people
130. 3:53tell them their cooking is good and
131. 3:54they're like you should open a
132. 3:55restaurant. Like you love fitness, you
133. 3:56should start it. Like that. It's very
134. 3:57easy to get people to say yes.
135. 3:59>> Not for a lot of money though. So my my
136. 4:02honest truth is I think if you look at
137. 4:04your current business model and say how
138. 4:06could I cut down the complexity by 80%.
139. 4:10>> And then franchise it.
140. 4:11>> So I'll give you I'll tell you a story.
141. 4:13So um the most successful fitness
142. 4:14franchise um right now is Alloy. They do
143. 4:18semi-private training. Rick Mayo is a
144. 4:19really good friend of mine. Um he had a
145. 4:22$4 million a year single facility
146. 4:24>> and they had smoothie bar merch PT
147. 4:28semi-private large group. the at
148. 4:30everything, right? And when he went to
149. 4:32franchise, he looked at revenue per
150. 4:35square foot across all the business
151. 4:36units and saw that semi-private was by
152. 4:38far the highest revenue per square foot.
153. 4:41So, he had his 6,000 whatever square
154. 4:43foot facility. He fired all of his
155. 4:45clients except for his semi-private. It
156. 4:47was still profitable with a 6,000, you
157. 4:50know, square foot lease. Opened up a
158. 4:52pilot location with only the most
159. 4:53profitable service that had three
160. 4:55employees, one manager that does
161. 4:57mornings and evenings and does sales and
162. 4:59then an assistant that does morning and
163. 5:00assistant does does evenings and works
164. 5:02back up.
165. 5:02>> And so with a threeperson model does
166. 5:04five or $600,000 a year, 50% margins,
167. 5:07and you can just cookie cutter that
168. 5:08thing. And so I think your instinct on
169. 5:11the front end was of like I could add
170. 5:12all these things. I think it's 100%
171. 5:14right not to do that. and then look at
172. 5:16your most profitable times, look at your
173. 5:17most profitable pricing and packages,
174. 5:19and then I would look at stripping this
175. 5:20down to like how could I get this to the
176. 5:22fewest possible people who could run
177. 5:24this so that I could open up basically
178. 5:25somebody else could do this,
179. 5:27>> right?
180. 5:27>> And that's probably the like that is the
181. 5:30most likely path to the goal that you
182. 5:31have. I'm not saying it's easy, but it's
183. 5:33the most likely path to where you want
184. 5:34to go.
185. 5:34>> Yeah. And what about the licensing?
186. 5:36>> Same same just different different legal
187. 5:38structure.
188. 5:38>> Okay.
189. 5:40>> Yeah.
190. 5:40>> All right.
191. 5:41>> Just being real. Like I mean you could
192. 5:42obviously open more locations. Seems
193. 5:43like you're competent. Um, I say as a
194. 5:45compliment. Uh, but if you want the if
195. 5:48you want the exit that you're looking
196. 5:49for, like I can't I mean I know a lot of
197. 5:51people in the fitness world um who have
198. 5:53five locations, 10 locations.
199. 5:55>> So few like almost every one of them did
200. 5:58never sold the whole thing. I don't know
201. 6:00one who sold the whole thing.
202. 6:02>> Every one of them peacemealed it. One to
203. 6:03a trainer, one to a customer, one to a
204. 6:06competitor, one like they had to break
205. 6:08the whole thing up when they got tired.
206. 6:10>> Really?
207. 6:10>> Yeah.
208. 6:11>> Okay. Interesting. Thanks so much.
209. 6:14>> Cool. Yeah. If you like this video and
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