 Today's episode of Mind Pump is a unique one. It's becoming very clear that the $90 billion brick and mortar segment of the fitness industry is one of the hardest hit segments of our economy. gyms, studios, and group class facilities will order to be shut down by local, state, and federal governments all around the world. And there's tremendous uncertainty over when they'll be able to reopen and what that'll even look like. These fitness businesses rely heavily on human contact and on sharing equipment. Are they even going to survive a post-COVID world? Are consumers even going to want to go back to working out the way they did before? Here at Mind Pump, we have our own opinions on the situation, but we wanted to ask fitness leaders who are being directly affected by this crisis. Adam Justin and myself gathered up who we consider to be amazing representatives of different segments of this fitness space. We interviewed people like Breanne Mitchell from the high-end country club type fitness company, Bay Clubs. Scott Howell, a local owner of the successful personal training studio, Red Dot Fitness. Jason Khalippa, successful owner of multiple CrossFit type gym locations. Brendan Ayan Bedejo, who owns almost 50 group exercise, orange theory locations, and the godfather of the gym industry, Mark Mastroff, who founded 24-Hour Fitness back in the day and who currently owns hundreds of big box gyms like Crunch, UFC gyms, and many others. Now we figured if anyone could shed some light in the current state of the fitness industry and predict what the future for this particular space would look like, it was those people. Look, are the gyms gonna even survive? Are group exercise facilities gonna be forced to change their models forever? Is there a hope for the fitness space? You're gonna find out in today's Mind Pump episode. So we start by talking to Breanne Mitchell, who's the director of fitness programming at Bay Clubs. Now Bay Clubs are massive high-end fitness and health facilities that are more like country clubs than gyms. So I start out by asking her how Bay Clubs is handling the shutdown right now, both with staff and with members. So we actually decided right when this happened to not lay off any of our employees, we noticed that a lot of companies around us in this space were laying off their employees and we kind of came together as a team and our CEO is very, very transparent and we had a lot of calls right off the bat and he said, look, we're gonna put our heads together, we're gonna grind, we're gonna figure out how to do this as a team and we're all gonna cross the finish line as a team. So we decided not to let go of our staff and instead just work on providing value for our members in this time and then going out to membership base and kind of telling that story. So making phone calls and having conversations just saying, listen, we would love for you to stay with us, we're gonna give you the option of 100% dues, 50% dues or zero if you're having financial hardships. But look, the money's not going for like our profit, we're actually just trying to keep our entire staff on board and our membership responded really well and we were able to do that. So she explained a very interesting strategy. Then I wanted to know how well it was actually working for them. We did lose quite a bit that opted out but we've been able to at least for a good chunk of a lot of our salaried employees took a slight reduction in pay but it was more important for us to pay our frontline staff. So we've kind of talked about it like we're protecting that frontline staff and then the higher earners are taking a little bit of a dip. So to answer your question, we did see a lot of people that opted to not pay their dues but they're more on a freeze right now until we can open our doors. So we didn't necessarily have people that quit their membership completely, they're just opting out for right now until we can open. I thought that was really cool that they kept most or all of their staff. Then I asked her how they were planning on bringing value to members so that they can keep paying dues. I jumped in kind of seeing that this was gonna happen. I've been emailing Matthew Stevens, our CEO, just saying, hey, listen, I think we could take some stuff online if we need to and it's funny because it went from a week, the week before of me saying, this might sound crazy but if we need to go online, just know I got some ideas and we can do this to the next week going, okay, we gotta go online tomorrow. So we quickly pivoted and we represent four different quadrants. We got hospitality, sports, family and fitness. And with all four quadrants, we put a programming task force together and we went online literally overnight. So we're doing online content for, I'm managing all the online fitness content, we have sports content and we have family activities and content online. So that all sounds really good. It sounded good to me, but I kept thinking to myself, how are you guys gonna plan on reopening when the laws change and the governments allow us to operate our businesses? We're working really hard right now because we have the square footage in the real estate to respect social distancing. And obviously we are implementing insanely high quality sanitation SOPs but we have an entire team right now working on what those SOPs are gonna look like. So pushing for being part of the essential business in phase one to open up our doors. And so for group exercise, I'll just start with that one. We specifically are gonna take all those classes either outdoors or in a place that has high ceilings. So tennis courts, pool decks, basketball courts, open turf fields, like for example, in LA specifically, just cause I'm based there, I can speak to that. We have in our Rajondo Beach location, we have a 22,000 square foot turf outdoors. So we can definitely host classes out there. We have a huge clipper court that the clippers used to practice on at our El Segundo property as well as a half court. So we're just taking everything either outdoors or to a spot that has really high ceilings. Every space will most likely be a bookable space. And we have that option through our app where you reserve space in the club. And then we're kind of thinking of fitness as fitness pods. So you kind of work out with, maybe you work out with your family and like people that you've been social distancing with and that'll be a bookable space. So everything will be reservation based. Everything will be have everything has detailed SOPs to like what kind of tool and what kind of spray do you use to clean that when the member is finished using it? And because we have kept our entire staff, we have a great option of, you might not be training all your clients, but hey, you're being paid for your hours. So why don't you come in and you're now part of the team that's gonna help direct traffic and clean equipment in between use. Well, in the end, she expressed her outlook for the future of Bay Clubs. And she said, focus on what you can change, leave what you can't. I thought that was really, really good advice. I'm definitely positive person. So I could just preface with that, but I do. I really think that in times of adversity, you have two options. You can sit there and focus on the things that you can't do or you can go, wow, what are the things that I can do? We're gonna actually jump in, we're gonna do what we can and we're gonna save the fitness space and we're gonna make sure that we can do this in a safe and healthy way. Next, I talked to someone from a seemingly opposite part of the fitness space. Scott Howell owns a local successful personal training gym here in San Jose called Red Dot. In fact, we've actually filmed some videos there ourselves in the past. His facility much smaller than the typical Bay Clubs, which are these 100,000 square foot facilities. His facility is closer to like 6,000 square feet. He depends almost entirely on personal training for his business. So I started out by asking him how they're handling things at this moment. Yeah, I think the first thing was just let's stabilize things a bit. Let's understand what this is gonna mean. And I think one of the challenging parts about it was is we were fed kind of the, well, this is gonna be for a few weeks, not really knowing what the timeline was, which challenges a little bit, but you know, right away, you shut mid month down in the fitness business and that cash flow stops or is about to stop, you're gonna be in big trouble. So what are the things you have to do? The first thing you gotta do is just kind of make sure your team is organized to respond. So get the staff together, help them try to understand what we're doing, be transparent about it, not try to paint any pretty pictures. You just gotta be upfront with them so that they're ready to respond for you. And I think they appreciated that about us going in. So they appreciated us, they appreciated us kind of coming forward and go, here's what this means. The second thing was kind of stabilizing the membership and the people that were already in the, that are in our funnel. And I think we have probably an advantage over a lot of different fitness businesses and that we already have our clients trust. They believe we're in it for them 100%. So it was getting communication out to how we were going to handle the situation. And initially, we started hearing news that we were just gonna be sort of restricted. There was gonna be social distancing before the shutdown. So we had already had some communication with about what we were doing as a company to keep them safe, to keep the operation going, to let them know that we're there to work with them and for them if they had things they wanted to discuss like potentially not coming in because they didn't feel safe. How could we help them outside of the gym? Then you went into how they were bringing value and service to their clients to keep some revenue coming in. We got out in front and now you're seeing kind of everybody doing it. One of the ways was, okay, let's make sure we're doing some webcast sessions. Let's get them going, right? Let's try to keep them moving the best we can. The next thing was, is okay, we have all these personal training clients. Well, online coaching, online training is not anything new. We just hadn't been doing it before. So we very quickly began to onboard a platform which we could deliver our services online and virtually. Virtually meaning, you know, you might be on one side of the Zoom call or the FaceTime call, the Skype call, and I'm on the other. The other one would just be like, okay, I'm gonna provide you some programming and here's what you do, send me a list of your equipment, what you have availability to and what you don't and really just trying to be communicating with the membership every day. They were getting an email from us every day and our coaches were reaching out to their clients every day just trying to stay in contact. Okay, so the big question is, how many people did Red Dot lose? And the number of six, six members. So what we did was is we were, you know, we're working with people to push payments, but if this is people that are going, listen, I just can't do this. I've lost my job, you know, and I think I'm gonna get hired back or I've been furloughed. I'm coming back. I'm coming back as soon as this thing's over. I just, I reasonably cannot do this right now. Can you move my payment date? So we've been moving some payment dates. Some people might look at that as a cancellation, but I don't, we look at that as, hey, you've made the commitment to us. We're making the commitment to you. We're just gonna move that commitment a little further forward and that's totally reasonable. The other part of that is we've had, obviously if there's only been six people that have actually canceled and we've moved several payment dates, maybe four or five times that. The rest of those people are hanging in there with us. Either one, because we're continuing to provide them service. And again, 30% of my business is that, is that that group training aspect, the rest of its personalized services. So we've found a way to deliver that one way or another, at least at a level high enough to where they've hung on. I was blown away when you said only six members. That's unbelievable. I think that's a testament to their quality service. But how would they reopen when they got the green light from lawmakers? Yeah, lots of questions to be answered. We actually got out in front of that a bit when the social distance, the six feet of space and things were kind of laid on us the week before the shutdown. Here's the way it basically works is, we never really have more than 20 to 30 people at any given time in the facility. It's usually more like 20 to 25 on our busiest times or peak hours. So you guys see, that's the six a.m., five a.m., six a.m., and then in the a.m. or p.m. And so when you do the math, you pencil out the math, there's more than 10 feet of space per person if you really penciled out the math. Now, certainly people are gonna be in closer contact than that passing one another by as things would be on the sidewalk or in the park outside right now. But we could easily pivot to manage if we had to, if there were some stricter restrictions saying our group classes, which we only have eight to 10 people at any given time, we could manage the size of those classes and then add additional classes to make up for the smaller class size to move things around a little bit. Everything is by appointment only. So in fact, we can manage every single hour and every single body on the floor if we had to. Then I asked them if he was optimistic or pessimistic about the future. Both, I think I always err on positive. That's just a choice that I make. I think the unknown about, again, what restrictions might be made is a little bit of a concern, but not really it's more of, I would just like to know what they are so that we can plan for them because I'm sure we can work through them. I think the biggest unknown is, how long is it gonna take for people to feel really comfortable and safe coming back, that being one. I really feel we've done a good job and the feedback that we've received, that tells me that the people will be back sort of right away. We're still gonna have some people that are gonna be a little cautious, of course, and they should be. That's natural. I'm also a little bit concerned about the long term with regard to the things you kind of start hearing about, like, well, hey, this is just the first wave and then come December or flu season the next year, we're all gonna get nailed by this thing again. That's a little bit of a concern for me. Judging by how we've kind of responded to this, we is in general, I'm not really optimistic about that. Now, we know Scott personally and he's one of the best personal training studio operators around. So to hear him be concerned was very, very interesting. The next person I talked to was Jason Khalifa, who owns many CrossFit type gyms around the world. Now, the CrossFit model is an interesting model. It combines traditional small gym feel with group exercise type classes. I asked him how they were managing their business at the moment. I think the answer is, obviously there's no easy way around this, but the way we had to do is, because it's a business, we don't know how long it's gonna go for. Maybe it goes for a month, two months, three months, whatever. Well, we know it's not gonna go for a month because it's already gone a month. But point being is that what we had to stay fast to is, hey, the business had its position and then Jason Khalifa might have its own position. Here's what I mean by that. When we put out communication to our staff, we paid them for a certain amount of time. Everybody, there's a lot of full timers that have PTO. So we really fall into three categories. Some people we furloughed, some people are currently using PTO, which this would be a good time to use that. And then other people are getting paid their normal rate and it really is dependent on one very simple thing. Are they able to work or not? If they're able to work, we're gonna take care of them. If they're not able to work, we had to kind of draw a line in the sand and say, hey, if you're a full-time coach and you can't coach in person right now, the business can't fully finance you because we don't know how long this is gonna go out for. So that's how they worked with their staff. But what about their members? We decided to put everybody on hold instead of continuing to charge them for a variety of reasons. But the biggest one being, we just felt like it was the right thing to do. Someone had signed up, let's just say they paid $250 a month for a certain type of service. We can no longer provide that same service. And so we didn't feel like it was fair to continue to bill them for that. Now, other gyms might see it other ways. What we did is we gave four options. Option A, keep your membership the way it is. What you really, you had to reenact your membership. So we wouldn't just, so we sent out this email. And if you keep your membership and the cash flow to the business, we will then provide that back to you within 120 days of us reopening. So let's just say we're closed for two months. We will then credit their account for two months within 120 days of reopening. Said this way we could disperse that revenue over 120, the next six months to then recoup those people who actually support us at a full freight. They also got equipment rentals, which is a part of what we did. We used docuSigns, we did a large amount of equipment rentals. So option A was that, and then you get all of our digital platform as well, which was our Facebook Live, our app, a variety of different tools we had already in place that we gave them. Option B was just go digital. That was $40 a month. And a lot of people opted in for that. So instead of paying $200 a month, you option two. Option three was you sign up separately for virtual personal training. This was a way that we could support our coaches through this time. Basically all the revenue went to them. So it was a third option, right? Was to sign up with the coach for virtual personal training, which you could also bucket with other options. Or option four was keep your membership on hold. And we look forward to seeing you back in here when the doors reopen. Then I asked Jason, if he was worried about the future of his business. This is an unprecedented times. And I think with that comes a lot of anxiousness, a lot of sadness for furloughing people, et cetera, but also a lot of excitement. Because we more than ever are gonna see opportunities present themselves in all areas that have never presented themselves before. One of those being, if you had an area in your business that wasn't as successful as it could have been, this could be a really good time to make shifts and pivots away from that. So for us, we had talked about growing our digital and consumer product for years. We were really focused on brick and mortar and then our business to business tools. So now we had to recharge. So we've grown our e-commerce, like a gazillion percent since we switched over. We've grown our end consumer product. And so now what we need to do is look at our brick and mortar and say, hey, we're any of these underperforming and is this a good time just to call it duck a duck and shift out. Since CrossFit is a class-based business, I wanted Jason to tell me how they would move forward when things reopen with the inevitable restrictions from new laws. You know, it's really gonna be based on what the government mandates. So let's just say they say six foot apart. Well, then what we're gonna have to do is go in there and say, all right, let's look at a, we used to base our business model off of 100 square feet per person. So let's just say a 2,000 square foot floor, which, you know, your guys location in San Jose was probably give or take two, 3,000 square feet. I can't remember exactly what it was. But if you took that, you could accommodate 20 to 30 athletes in 100 square foot, like diameter. Now we're probably gonna have to ramp that up to about 200 square feet. So I imagine our class size will be cut in half. Wow, classes cut in half. Does that mean that they would have to double their membership fees? That's a really great question as well. You know, I've had that same concern for restaurants. So if a restaurant built their business model based on, you know, 12 tabletops, and now they have to cut that down to six, are they even gonna be able to reopen? And I think the answer would be from a restaurant perspective is that you will have these six tabletops inside, but then you're gonna have to compensate it or support it with to go orders. And I'd like to say that's a similar model to what we're gonna have to do, which is gonna be potentially keeping the price in the way it is. Cap classes have class reservations and then also have maybe expand our class schedule, open gym hours more, and then maybe grow personal training and one-on-one. So at this time, I don't know if our fees are gonna be more. I don't anticipate that, but I think we're gonna be able to pivot to more open gym model, personal training model more inside our brick and mortars. Now Jason is very skilled. He's experienced and he's one of the most successful gym business owners we know. I asked him his opinion surrounding the current average CrossFit box owners. These are people who may not be as skilled or experienced as he is. Actually what I really said was, do you think the average CrossFit box is gonna die? You know, and this is a really interesting question. I think a great way to relate to it is like in the hospitals. And this is not a non-political statement, but you have someone who's maybe, you know, 80 years old has been in and out of the hospital for a year. And then the thing that just puts them over the edge is COVID, right? Let's just say, right? But they were already unhealthy leading up into that point. And in terms of like their, the individual was already in and out of the hospital a ton, right? They already had other underlying issues. Same thing I could see you in the CrossFit space where for the last six months or a year, they've had underlying issues, right? They've been going into the, you know, business hospital for months and months and months. And now this is the thing that just kind of like wakes them up and says, hey, you know what, maybe this isn't for me, or it just puts them in that rut, or maybe it's looked at as a way out from a social pressure perspective that they don't think there'll be as much pressure that it's looked at as much of a failure. And so because of those things, and I'm not disagreeing with those things, right? But because of those, I think you'll see people, more people than you think close up shop, not just because of COVID though, I just want to be clear on that, but more because their business wasn't where it needed to be for a year. And this is a great opportunity to get out. So that was a really interesting point. So what should the average CrossFit box owner do right now? You know, I've been trying to support the CrossFit business market for over a decade. And I've put on business seminars, you name it, where you donated money, whatever. I've talked to on average on probably 1,000 owners easily a year in person, easily. And on average through all of our analysis, the average CrossFit gym owner takes home about $2,500 a month to 3,000. That's take home, right? So, and their owner operated. So when they say their business makes 40,000 a year, it actually doesn't because it's paying them that as their salary to operate it. So essentially they have a job that's paying them $40,000 a year that they really like. And because of that, there's not much reserves in the tank. And so if you're shut down for two, three months, you know, a lot of these businesses though, they've been able to ship to online and their consumers are very dedicated to them because they feel that hometown close knit group. But once you go from 30, 60 days, you know, allegiance only goes so far before people started looking at their bills and realize they're paying a premium for a service they're no longer receiving. So if this thing goes out another month, another two months, you're gonna see some major challenges hitting the market for sure. Then I brought up how a lot of CrossFit box owners are trying to switch to digital to continue to stay profitable. Right now you need a shift. Everybody agrees on that, right? But if you shift too hard and you try and become something you're not, you might get stuck being one foot in, one foot out on everything. And here's what I mean by that. If you were born a brick and mortar guy and for the last decade, you've been brick and mortaring. And then all of a sudden you shifted to Zoom classes and live classes because you had to. Well, if you go too deep down the rabbit hole on digital and you, there's gonna be a time where you need to make a decision. What do you want your business to stand for? And do you have the resources in mind to grow? And is digital just this thing you're gonna do to cover you in the interim? Or is it gonna be a fundamental piece of your business? And if it is gonna be a fundamental piece of your business, you'd be careful you're not distracted in one way or another when the brick and mortar opens because right now you're locked into leases, you're locked into personally guaranteed stuff. When it reopens, if you're too focused on digital, it could hurt your brick and mortar. If you're too focused on brick and mortar and you're not doing digital, it could be detrimental as well. So you need to be aware of those things and make sure you have the staff and the bandwidth to accommodate it and know which way you're gonna win. The next person we talked to was Brendan Ayan-Bidejo. He's a friend of mine, an ex-NFL player, Super Bowl winner turned entrepreneur who found massive success owning and operating multiple orange theory locations. In fact, at the moment, he owns close to 50 of them. Now orange theory is group class workouts, which we think will be hit hardest by the pandemic due to the group model. Like every other gym, orange theory locations are all currently totally shut down. Here, he's telling me how he's handling his 500 employees and they're tens of thousands of members. You know, so what we did is we shut everything down so members can't cancel, members can't do anything. We froze the entire system and that was a corporate move. So over a million members instantly got froze from when the shutdown happened, you know, mid-March. We furloughed 99% of our staff. We kept about 10 people in place, mostly executive, accounting, HR, a little bit of marketing, and then some of our top leadership, studio development, sales and operations, so on and so forth. So there's about 10 people I even laid myself off because I wanna make sure the business is healthy when we come back and I have one of the higher salaries in the company. Wow, 99% furloughed, that's tough. I asked them how they planned on reopening. You know, if you're gonna be in the workout, you're wearing some type of covering over your face. If you're coaching the workout, not only will you have a covering over your mouth and nose, but you also have a mask covering your eyes, what the period is in between classes and then what the amount of members are that we're gonna let inside of the class. And just talking, we don't know the situation just yet. You know, typically we can hold anywhere from 26 to 45 people. We're talking about letting in 12 to 20 people. So one third of what we would normally let into the class is what we're talking about right now in terms of safety, keeping members off the ground because we know that airborne stuff can fly out of your mouth and it can fly onto the ground and then you're touching the ground and it transfers to your face. So no exercises on the ground. And then a nice cleaning in between classes whereas normally we do every class every hour. Now we're talking about 15, 30 minute gaps so we can go in and disinfect the studio before. Okay, so Brendan said class sizes would have to be cut by 60%. Now wouldn't that mean membership prices would have to increase to make up the difference? You know, we'll just have to eat it. Understanding that members will come in and they'll take classes and just trying to get them in. Just imagine, you know, some of our studios are pushing up on 1,500, 1,600 members and a 3,000 to 3,500 square foot studio. So we know that we're gonna lose some members. We know members, some members aren't gonna feel safe coming back just yet, but we wanna get people back in when it's safe and solely ramp up back to normal but we don't know when exactly normal's gonna be. Then I wanted to know if Brendan was fearful about the future and if he thought normal would come back or if he expects things to be different permanently. Yeah, I mean, I think there is gonna be a new normal coming out of this and what is that new normal? Is that new normal where we distance ourselves and we really have social distancing when everything's healthy and everything's fine? Is the new normal gonna be at home workouts and our business will never return back to what it was? So, you know, those are kind of some of the fears that I do have. And of course, I'm like you guys, I'm super positive and optimistic as to the outcome and especially when we have a vaccine but who knows when that's gonna be? What's gonna happen kind of in that interim period? What's gonna happen in November when they say things are gonna start to ramp up again? So there's so many unknowns and a lot of fears. I'm not gonna sit here in the bed all day but those are definitely the things that I think about that do cause a little bit of stress. Okay, so Brendan obviously has many locations and has lots of financial support. But what about the small orange theory location owners? That's what I asked him his opinion about. We have backing, we've been really smart with our finances. We have some really, really smart people in our financial team that are helping give us, giving us advice. Our board meets every week and we have to vote on, you know, what we're gonna do in certain situations and circumstances. Whereas, you know, the brand new franchisee, new entrepreneur doesn't have all those resources and all that access and brain power to help them navigate and assist. And it's actually even more complex for them to get their money and do the right applications. We had our finance team was on it from the start and they worked all night. They worked 36 hours straight to get our funding in and even leapfrog people because we had all of our paperwork done. Whereas, you know, the typical franchisee, they're gonna, you know, they have their family to take care of. They're busy thinking about the business and what they're gonna do with their rents and whatnot. So we just had a huge leg up cause our team is so strong. So it's gonna be tough for those small companies to bounce back for sure, no doubt about it. Now our last conversation was with who we consider to be one of the smartest people in the gym business. Mark Mastroff wrote the book on creating successful gyms when he founded 20 for our fitness. Now he's currently the president and chief executive officer at fitness holdings worldwide, which has their hands in too many gym brands to even mention. Among them is Crunch, UFC gyms and many, many others. So we started talking about how they responded to the shutdown. You know, we closed and we stopped billing our members. We took a look at the landscape and said, hey, do we keep our employees down and we're gonna open in two weeks or do we think we're gonna be shut for six to eight or 10 weeks and we have to furlough our folks? What do we do? So with our, most of our brands we furloughed a vast majority of our people so they could immediately get out and achieve unemployment checks that the government put out. And then we filed for the PPP loans to see if we would be able to get some of the small business loans so we could pay our employees. That's kind of where we ended up with, I think the vast majority of our companies and brands. So they essentially stopped billing everyone. I then asked Mark if they went digital to try to generate at least some revenue. We didn't see this as an opportunity to try and go, you know, make money in the sense that we were gonna create a digital platform and charge our members or charge non-members and I'd be curious to see if anybody was able to do that and pull that off in a meaningful way. We just took our platforms and if we had digital support we gave it away for free. And if we didn't, we created streaming through either YouTube or through Instagram where people could take live classes from our instructors and we just stayed in contact with our members. So I don't think any of our businesses are thriving because we have zero revenue coming in right now from any of them. They're just shut down. We're not charging anybody anything. We don't feel that's the right thing to do and we're waiting for the green light to get back open. Crazy, zero revenue. That represents millions of dollars every month when you consider the vast majority of his locations. I then asked Mark to provide some details in regards to how they would operate when they're finally allowed to reopen. You know, the CDC has put out some guidelines on what they think we should do as a business and then Georgia came out yesterday and Alabama were the first two to open with guidelines for gyms and what they felt you should look to do. Most of what is what we had in place already in our thinking but what you're probably gonna see is similar to what other countries around the world have already implemented such as Asia. You're gonna take people's temperature when they come in the front door to ensure that they're not of temperature and if they aren't, you'll allow them to come in and start to exercise. Everybody's gonna have to wear a mask and a face guard of some type to get into exercise. You're gonna limit the number of people based on whatever the requirements are. Utah came out at one person for every 200 square feet of floor space. Other places are using social distancing, you know, six to 10 feet apart. You're gonna change your facilities. You're going to space the equipment out accordingly. You're gonna spread your cardio out accordingly. You're gonna put a lot of stations that offer cleaning solutions so people can spray down and wipe down equipment if they want to before they use it and after they use it. You're gonna continue to talk to your members about washing in their hands in warm water and for 20 seconds with soap or using the products that you put in there for them. You're gonna make sure that everybody's spaces inside your facility and you'll probably limit the number of people that come in and you might use the one per 200 or one per 150 to kind of get to a number that makes it comfortable. You may, which some of our brands are doing, you may create an app where you basically book your workout. So if you wanna come in at nine in the morning, you're one of the number of people that are loud in at that time and you'll have a slot that you can come in and use to work out and you may come in at half hours if you wanna be one of a few people come in at two in the morning when no one's here. So you'll try and get back to some normalcy. You'll be able to come in and do your cardio, do your strength workouts. Classes will probably start a little bit later and we might wait two to four weeks and see what our members think and then do the same thing in our classes where we'll spread it out. As Mark was talking, I kept thinking, do you have locations all over the world with potentially different laws in each different jurisdiction? So I asked him about this. You've got federal and state governments and you've got local county. You just don't know who's gonna be the final decision maker but it'll ebb and flow I think as each day goes by and we'll adjust accordingly. But our goal is to create a really strong community and healthy environment for everybody so they can at least get out of their house and get a little exercise in. We don't wanna see the disease spread, of course. What's really interesting is that we really found none of our staff contacted the COVID other than I think two of our corporate staff in New York had gotten it but in our gyms, our facilities, throughout all of our portfolios we did not have any reports of people attaining the virus. And then we didn't have any members that contacted us saying, oh my God, I got the virus. I worked out there yesterday. So we think that either it already worked through a lot of people earlier in the year like it had in the Bay Area where we know a lot of people had it in December, November, January, February just never reporting it, no one knowing what it was. And we think that the healthy person who's exercising, who's got a strong immune system who doesn't have a lot of inflammation or body who's getting after it is gonna be a person that blows through this as well as anybody. As he was explaining the reopen process I asked how they would profit with less people in the facilities. I mean, how was that possible? Depending on the brand, each brand's a little bit different in the strategy behind it. But what you can do is take your pricing up. So you can say, look, we're gonna take our pricing to a higher price point. We're gonna have less members but that means we're gonna have less people working out. We'll probably still get to the same revenue number and hopefully the same profit number but we'll have less people to do it. And some people are gonna feel more comfortable in that environment where there's less people in the gym. Then you have your high volume gyms where you're down at the lower price point, 10 to $20. And there you have to be able to, again, space everybody out, which is kind of what I think you're gonna be forced to do. I think it's the smart thing to do is to create that social distancing and then make sure you protect yourselves. Don't touch your mouth, your nose, your eyes, your face. Keep your hands away from that. Make sure you wash them, clean them really good. Get your exercise in and then get out. It's no different to me than potentially going to the grocery store and picking up 30, 40 products, going up and down the aisles and checking out. You're being exposed to a lot of things you're touching. So you just gotta make sure you keep your hands clean and don't touch your face. So hopefully all that comes together, but we haven't put plans together that says, what is it if the world ends? What is it if the virus basically stays here for a year? What is it if, if you get into all that, it's just too much work. You have to stay a little bit more on the positive side that says some of these markets are gonna start opening by May, later than June, there's gonna be rules that govern you. You're gonna go back to work and you're gonna work with your members to create a really safe and effective environment within your community. You can help your community get through this and you let people talk to each other and try to feel like they're back to life a little bit. Now, since I know Mark personally, I mean, I started my career at 24 Fitness back when he used to own the company, I wanted to know his personal opinion on the whole thing. So I asked him candidly, what do you think? You know, we've been locked down and we're heading all the way probably with Gavin. I would guess to the middle of May to 1st of June. So if that's gonna be the case, the issue is that people aren't working and not gonna be able to put food on the table. And how long can you shut society down and how long can you fund society before it gets to a point of no return? That's really the thing you start thinking about. Can really you take 90% of the US population and tell them that they have to sit at home of which probably half of those aren't working because some are still working from home and getting paid but maybe as many as half of them are not working and say, you have no income for three months. A lot of people don't have cash savings to get them through three months. So that's gonna be how do I work out with my landlord, my car payment, my insurance, my food? It starts getting to a different conversation. Because Mark is such an influential figure in the gym industry and someone who is full of gym business knowledge and experience, I wanted to know how he felt about the future of the entire gym fitness industry. I feel pretty positive. I think there's gonna be some fallout where some people financially won't be able to make it through. So that'll reduce a little bit of the footprints out there. Hopefully it won't be too bad for our industry but there'll be some brands that decide strategically to make a decision to maybe file bankruptcy and close some of their product and keep some of their product. There'll be some people that feel like, I don't wanna do this anymore. I just wanna move on. And then there'll be a bunch of people that are just gonna get after it. We had a very strong presence in Asia when SARS came through. And so it was a similar situation. You were shut down like this for a period of time but like the Chinese were able to get through the COVID-19 much quicker than most. The SARS situation came and went within probably 90 days and we got back to work. And what was super interesting back in SARS was is that we were very slow during that period and we were shut down for a while. But when we got reopened, we did a lot of work on Bloomberg and CNN and CNBC and Steve Kleinfelter was our president out there at the time and Steve was on TV almost daily talking about having to get into exercise and build up your immune system to fight SARS. And we came back out of it and just crushed it. The club business just grew like crazy. So we may find a similar thing here where people start to recognize that I need to exercise and whether you're doing it at a gym, whether you're doing it at home through digital, whether you're getting out into the park, you're walking in your neighborhood, you need to get more active. It's very simple. You gotta get your body leaner. It's gotta be more fit and you gotta get inflammation out of it. So you gotta watch your diet because this disease is hitting the obese very hard and seeing the people of age very hard and seeing the people with bad or poor cardiovascular heart systems. So our industry can help and I've always been a believer since the, when I first started in this industry is that we know you can't get to the gym every day. So work out at home, work out on the road in a hotel, run, exercise, play tennis, play hoops in a park, do something to keep active on a daily basis. Man, you know, after I talked to all those people, we talked off air, you know, just some candid conversation. One thing they all had in common was how positive they were. I mean, we didn't include some of that stuff in their interviews, but at the end we were just talking. It was like everybody seemed very positive about the future. No, I didn't expect anything less from those. I mean, every person that we interviewed is extremely successful in their respected space. When we were talking, and part of me, I had to be honest and listening to their response, I'm like, you know, you have to say that if you're any of them. It's the same way if somebody were to ask me right now and say, you know, mine pump is, you know, starving right now or business is reduced by 50%. Are you scared at them? Like no, I'm gonna be very optimistic and most successful leaders are already gonna be proactive with things like this. So that part didn't really surprise me. Yeah, they have to be leaders in their space and show that they have answers for a lot of this going on right now. It's like, you know, they have to maintain this positive optimistic attitude in order to kind of, you know, take everybody with them and going on to the future. Yeah, and the other thing to consider too is these people are all from the fitness space, just like we are. And I think generally speaking, people in the fitness space tend to lean towards being self-sufficient. They tend to be, you know, growth-minded. They tend to feel like they can make things happen. I mean, when you get into exercise, this is your mentality to begin with. So, you know, they were very positive, but I think you make a very good point, Adam. Well, and in my, this is my opinion, I think only two of these people do I see, personally, I see real positive outcome from this. That was Brie with the large, the large box. The Bay clubs. One of the things that we didn't cover and that she didn't really go into very much, but I'm very aware of with their business model is they are kind of like how McDonald's is a real estate company before it's a burger company. They're the same way with the gym industry. They have these massive locations in very high-end areas and they own them. That's not the model for most gyms. Most gyms look for leases and they're always, they're always trying to negotiate really, really low leases just so they can make as much money as they possibly can and then get in and get out where they look at it like, this is high property value. Like for example, the one that's local near us, like the Los Gatos area. I mean, the property value in itself, they have a lot of capital that they can tap in until they want to. So that really saves their butt. That is interesting because then it allows them to be able to pivot into potentially a different industry. Well, it just puts them at a lower risk because they've got tons of capital. I mean, if you bought a location in Los Gatos 20 years ago, I mean, and that massive, they have to have millions of dollars in equity. And your mortgage is gonna be nowhere near what you would pay for a lease these days. Again, you own the property, so you control some of the expenses or a little more than you normally would. The other thing too is that they attract a high paying, high service member. These are people who expect to pay a lot of money. I mean, I know the courtside one, like you set up in Los Gatos, it's thousands of dollars to join, hundreds of dollars a month. So when you ask people like that who want exclusivity, who want that high service to pay more money to accommodate for the fact that there's not gonna be as many members, they're less likely, I think, to balk at the price than say, the typical 24 hour fitness member. Right, they also are built to handle a small amount of people that have to have spacing, right? So you have these massive square footage. I mean, she mentions the outdoor location that they have that was like 20,000 square foot. So they are already built to give everybody lots of space, which is the opposite to what you were saying, Sal, with some of these other locations that they try and squeeze as many people as inscribed. The other one I think too is when we're talking about smaller spaces, the private training, the personal training type of gyms where it's very high service oriented. So their emphasis is more on the actual service of it rather than the volume of people actually coming through the gym. I agree because even Scott said they lost six members when they saw one down. That's nothing. Now I've worked in personal training for a long time and I know that the relationship you build with your client, the trust you build with them, very different than what you would build with just a member that comes in and out of your doors to work out on their own. And again, these are people who expect to pay more for a higher level of service and personal training gyms don't typically pack as many people in their doors like a big gym. So they're more likely to be able to be okay with the new laws that'll say, hey, keep everybody six feet or 10 feet apart or whatever. Not to mention that. We're also comparing the, if you compare these all as boats, it's a lot harder to turn a massive huge ship than it is a little tiny boat. That brings me to Mastroff. That has got to be such a tough position. One thing that he said that I thought was very interesting was he had to look into all the different governments, whether it will be state or federal or local governments for all of his locations. Cause you're looking at hundreds. Even county by county. You're right. You're looking at hundreds, potentially thousands of locations, each one in different areas. One may say you need to have equipment that's 10 feet apart. This one may say you need to be taking everybody's temperature that walks in the door. These people need to wear masks. These people don't. That's a big ship that you have to kind of maneuver. Now that being said, if there's anybody that can make the impossible happen, somebody like Mark Mastroff and we're talking about, like again, he's the king of the gym industry. And so- I don't know. I feel like he's the highest at risk. And when you look at the dollar for dollar who is going to be hurt the most from this that everybody we talked to, it's anybody who owns a lot of these mid-sized gyms, I think, because he, you know, here's the thing, if someone like, you know, Scott, if you're a small box or small facilities, if those get hit or have to close down, the financial repercussions is nowhere near what it costs to operate a UFC gym or a 24-hour fitness type of facility. Those take millions of dollars in and out. So you have to shut down a few of those. That's a lot of revenue. So I think that's going to be one of the most hurtful. Well, I mean, and look at the model. These are big boxes that are cheap per unit. So what they're looking for is high volume of people, low costs. So here's a bunch of people paying $20, $25 a month. Now you're going to say, hey, you have to book a time to work out. You know, we can't fit as many people in. Oh, and by the way, because of that, we have to raise your prices. These are people who aren't willing to- It's a completely different model now. They're going to have, in my opinion, they will have a mass exodus. I think those gyms are going to have to either charge way more or completely figure out how to do it differently. Well, I think a lot of those gyms, too, they start off originally like the Scots with this value first and like handling a handful of members and then it grows, it grows, it grows. And what's happened to facilities like the 24Fitnesses, like the UFC gyms, is it's become so competitive that it's been a race to the bottom for so long. How can we charge as little as possible and still be profitable? And that model, I think, in this situation is for sure. This has exposed the flaw in that, completely. Totally, I think that model is not well suited for what we're about to see for the next year or two with post-COVID economy and all the laws. Now, the ones that I think are going to do the worst, that's easy for me. I think, and I hate to say this because he's a friend of mine, but I think the group class models are screwed. When you look at the Orange Theory facilities, these are facilities that depend on lots of people in a place working out together with an instructor. Now you're gonna have to maybe have two thirds of the people outside of the class. The only way they would be able to survive is by doubling or tripling somebody's fees. I don't see people paying that much money to take an Orange Theory class. Now, I have a lot of insight on that because I had the ability to work for them for two years and Brennan is also a friend of mine and I've seen a lot of the P&Ls so I know what kind of margins they run at. And they are very profitable. It's a very successful model right now, but someone like Brennan who's got the capital that he has, they've positioned himself very well, maybe he survives the situation, not maybe, I know he is. I know he will personally survive from this because the way he's set himself up and he has a lot of capital and he's protected. But if you're a single or two or maybe even three box owner, I mean, you can't realistically handle that kind of bleeding for several months in a row and be able to keep your doors open. So, yeah, I think you're gonna see a huge amount of spread down. Well, it's more than that. Then they're gonna reopen and normally in an Orange Theory class, you're standing next to people you're working out with. You're standing right next to them. This is two-thirds reduction. Yeah, you're moving from equipment and sharing equipment constantly. So how the heck, that whole model is gonna probably have to completely change. The problem is all of the locations are literally built around that model. In fact, Orange Theories, one of the reasons why they're so successful is that they bring in more money per square foot than most facilities. They maximize the square foot. They've maximized it. They've done an efficient job at doing that. Now, you know, CrossFit's in the same position. I mean, I can't really see anything different in terms of them, you know, having a struggle to create this group environment but now it's spread out. I mean, like it's gonna expose a lot of the business owners that haven't been able to, you know, weather this storm for sure. Yeah, you know, until we had these interviews, I would have actually originally said Orange Theory would be in a worse situation but I too believe that CrossFit is and mainly because Jason gave some incredible insight on how much money most CrossFit owners are actually making. Their margins are raising a lot less than I would have thought. Yeah, and I know that, and like I said, the Orange Theories are very profitable. So if you've got one, you've had one for six months or longer and you're running in the green, you could be potentially profiting, you know, 50 to $100,000 a month. That's a lot of capital for a lot of small overhead that you have to run with. So you may be able to hang on a little bit longer. If you are operating and you're only making 40 to $75,000 a year and you have to close your doors for two or three months. And then also when you reopen, you have to now play by different rules. Oh my God, we might see more CrossFit gyms close in the next six months than we've ever seen. Well, I think it's, look, it's easy to say and I think this is pretty obvious that the fitness industry, the brick and mortar area of the fitness industry is probably one of the hardest hit by far. I mean, so many models are just not gonna, you are talking about an industry that relies on people sharing equipment, people working out together, lots of people in a space, low cost. That's the main model is that low cost model. The fitness industry is gonna take a major hit here, but I don't think the fitness industry is gonna end. I think that they're still gonna continue. They're just gonna have to find new ways because people still wanna be active. They need to be active. It's extremely important for our health. So my overall outlook for the fitness industry extremely positive, but when you break it down to the individual components, I think there's gonna be a lot of washout. Oh, I think so too. And I also think that these guys avoided the conversation around how behavioral changes will change forever. What percentage of people have had to pivot themselves? Personally, when I talk about gym owners, the people that go, the members that attend, have had to pivot and change the way they exercise now. And how many of them are like, hey, you know what? I bought my at 670% increase right now in at-home gym equipment, right? So there's a lot of people that ran out and invested in having an at-home gym. How many of them are having success with that? How many of them are actually really liking that? And how many of them for sure, even if they know that maybe in the future they go back to gyms are like, you know what? I'm gonna ride the rest of this year out because I already invested in the equipment anyways. How many people go to these big box gyms just for the experience of it, right? It's the environment, like, oh, it's like my second home. I love going, but that's all gonna change because of all these parameters. I'm wearing mask now. I can't talk to anybody. I gotta be in, be out. Like where's the inviting environment anymore? Totally, it's like going to the grocery store right now. Going to the grocery store is anxiety inducing right now. You walk in, you gotta stay in particular space between people, people have masks on. Imagine going to the gym where you're supposed to release stress. You're supposed to take care of yourself and work out. People are wearing masks. Equipment is all spread out. Don't go near anybody. It's a weird kind of scary environment. And that's for the people who are gonna be courageous enough to step back in the gym. I think public fear is gonna linger for a little while. Even if they open everything up tomorrow, are people gonna flock back to these social gathering type businesses? I don't think so. Now I do think that the at-home fitness space is going to explode. Whether it's gym equipment with dumbbells and barbells and racks, or the tech stuff like Peloton and some of the other tech advances. Tonal, mirror. Huge. So I think that we're gonna see a big shift in how people work out. And at the very least, at the very, very least, let's just say everything did go back to normal. I can't see that happening for at least a year or two years at the very minimum. And I don't know very many of these gyms that can survive for a year or two of two thirds profits being taken away. And with that, go to mindpumpfree.com and download all of our guides, resources, and books. If you wanna contact your favorite podcast host, you can do it on Instagram. You can find Justin at Mind Pump Justin. You can find me at Mind Pump Sal and Adam at Mind Pump Adam.