Want to know how to reopen your fitness studio successfully? Matt Kafora owns 7 Orangetheory Fitness locations, all of which were forced to shut down due to the Coronavirus lockdown. Just before his fitness studios were allowed to reopen, Matt had an accident where he snapped both patella tendons, breaking both of his knees.
Despite surgery, being in a hospital bed, told he’d have to relearn how to walk, what do you think Matt did? He STILL reopened his 7 fitness studios during the Coronavirus Pandemic. This is my full Q&A (Question and Answer) interview with him…
How To Reopen Your Fitness Studio: The Owner of 7 Orangetheory Fitness Locations Reopened His Fitness Studios During Coronavirus
Mike [00:00:33] In this episode, I’m here with Matt Kafora owner of 20 businesses that do over seven figures, seven of which are fitness studios. And today we’re gonna talk about how he’s reopened all of the studios coming out of quarantine and how he’s done it with two broken knees.
Mike [00:01:08] Welcome to the GSD show. Ladies and gentlemen, Matt Kafora.
Mike [00:01:28] Matt, welcome to the GSD show again is like, is this second or third time you’ve been on now? Think it’s third.
Mike [00:01:33] I think it’s the third time. Yeah.
Mike [00:01:36] Pre quarantine, though, and with two knees that can function perfectly. Different story today.
Matt [00:01:42] Very different story today. Yeah, yeah, I mean, say everything was shut down for the quarantine and then, yes, some pretty big life events.
Matt [00:01:50] Man lost, lost the ability to walk. That was tough, right. And then get told, OK, you can open back up. I’m like, I’m stuck on the couch.
Mike [00:01:59] Yeah. So you were in Arizona. And we’ve been able to be open now for what, about a week, week in a half.
Mike [00:02:08] Yep.
Mike [00:02:10] OK. And so you’ve opened now all of your studios.
Matt [00:02:13] I have. I open all seven on just over a week ago, OK.
Mike [00:02:18] How how’s it been? Tell us about the experience. What’s it been like? More positive than expected. What did you expect? What did you not expect? What’s going exactly the way you thought and what’s not?
How To Prepare Your Fitness Studio For Reopening After Coronavirus
Matt [00:02:28] MAN three Loaded question there. So the positive, right? Members are super receptive. Members are ready to come back. That’s a load of answer, though.
Matt [00:02:39] So I say that there was a tremendous amount of preparation that went into making the studios feel safe, making them a member, making the members feel safe, making everyone want to come back in.
Matt [00:02:54] You know, obviously with COVID-19, you know, there’s a lot of talk of contagion and everyone getting sick and the potential for exposure and all these things. So you know what I’ve talked as with a lot of our Loud Rumor clients that we consult with is, you know, you need to position yourself as a solution. Right. So everyone is searching for a solution. So a solution for the economy, a solution for COVID to a solution for fitness, a solution for getting back into fitness.
Matt [00:03:21] And the way that we did that and we did it across the state was we really set up with a very stringent no-touch protocol. Right. So that went into place about two weeks prior to opening. My team came in and I have to give them a tremendous amount of credit. My team came in, they role-played, they trained, and we went through this entire process so that when the doors did open, my members felt very confident, very comfortable coming back. And knew that we were taking this very, very seriously. And so a tremendous amount of positivity for my members.
Matt [00:03:52] I haven’t heard anything negative as far as that goes, as far as the things that I didn’t expect. Right. You know, it was hard with securing some PPP money and knowing when we were going to open and not open.
Matt [00:04:06] And, you know, our governor out here in Arizona basically told us the night before was like, hey, tomorrow gyms can open. We caught a little bit of flack from some people online that we didn’t open the next day. Right. You had two months to prepare. How could you not reopen tomorrow? Unfortunately, I think what a lot of those people forgot is we have to recall that we need to retrain on new policies and protocols and safety measures that we’re putting in place to ensure the safety of the staff and my team, as well as all of the members that are coming in. So that was something that was a little bit. OK, go tomorrow. Right. So as a state, collectively, the ownership group said, hey, we’re going to push this until the twenty-six of the Tuesday after the holiday. And we said that’s going to push us out. And it worked out very, very well. And here again, we’ve got a tremendous amount of positive feedback on all the social media platforms from our members saying thank you so much for the care that you took to make sure that we’re safe in here. In fact, all of my managers were very good about collecting member testimonials the first couple days in and still are doing so, getting feedback from the members. And it’s open and it’s honest and candid and there’s a tremendous amount of individual saying, wow, thank you so much for taking these precautions. It’s always been clean at OrangeTheory. Your studios have always been beautiful, but we feel very, very safe in here. We’ve had those that are a little bit more high risk for whatever reason. We’ve had those with small children at home and they’re saying, listen, I have three small girls at home, three small kids at home, and I feel confident, comfortable going to OrangeTheory. And you should, too. So really, really cool.
What Your Class Sizes Need To Be After You Reopen Your Fitness Studio
Mike [00:05:41] Love it. Yeah. I actually want to dive into that a little bit tarnished in the process because it’s been a good marketing tool for you throughout these last couple of weeks. Class sizes though so, normally, how many can you fit in an average class, and then what are you looking at now and how is it affecting you?
Matt [00:05:56] Yes, so normally I run twenty-four to thirty-six members in a class, depending on if we’re running a two group or a three group. So depending on how the workout is set up with the current setup and the social distancing guidelines that we have to adhere to.
Matt [00:06:09] We are running half capacity. Right? So I’m running twelve members in a class.
Matt [00:06:16] That’s detrimental. I was running full classes before, right, so I was running classes of 24 to 36. You know, ten, twelve, fifteen classes sometimes a day at each of my locations. And now I have to cut that number in half. I can only serve half of my member base while they feel confident. They feel comfortable, they feel safe. The unfortunate part is, you know, you want to get in tomorrow for a workout and all of the classes are full. Right. So I’ve had to really pivot on that and determine is available ability more important than the increased payroll costs. And the other date is right. I need to be able to service all of my members. So if that means adding classes and some weird times or some off times or, you know, a little bit earlier, a little bit later and running classes that I wouldn’t normally keep based on the lower attendance, that’s been more important. And my members have been much more receptive in a shift to having those classes available to them than not being able to get in at all. Right. Is that poses a massive problem as far as members coming back. And that’s something that everyone in the industry is a little bit concerned with. Right. We don’t know what that looks like. We may have gone through it and we closed down and say we had a thousand members. You know, what are we coming back with post-COVID or post quarantine, right?
Matt [00:07:31] When we’re allowed to reopen and reopen with these certain guidelines that of certain restrictions? You know, what’s the industry look like? Are we going to get 60 percent of our member base back? Are we gonna get 70, 80, 90 percent? I think we can all assume we’re not going to get 100 percent back. But here again, it’s an assumption. It’s a giant question mark there. So, you know, altering comp plans if need be looking at how we’re going to structure our business to make sure that we can keep doors open, keep staff, service all of our members. I mean, there’s a lot of unknowns in that and there’s a lot of think on your feet sort of thing that has to happen.
How To Handle Free Trials To Your Fitness Studio After Reopening Post-Coronavirus
Mike [00:08:03] Right. Right. I got a question here from McKenna said, are you reserving spots for free trials? Obviously, you guys have done free trials in order to get new members in and really get them to understand what your gym is all about. What you’re studio is all about. So how are you handling that with limited spots?
Matt [00:08:21] That’s a great question. So here again, what I’ve recommended to a lot of our coaching clients here at Loud Rumor is, you know, take a couple of those primetime spots, right. You know, whether it’s five p.m., six p.m. block off anywhere between one and three.
Matt [00:08:38] Based on what your studio can do, block off any work to one and three spots for those intro or trial offers that you have coming in. It wouldn’t be a bad idea to also run some intro only classes. Here again, you don’t want to lose the ability to service your members. Right. First and foremost, I need to take care of my paying members who have been definitely loyal to me, who are coming back, you know, post quarantine.
Matt [00:09:02] But we’re seeing a tremendous influx from individuals who are wanting to get back into fitness.
Matt [00:09:09] Yes, we’re seeing a big influx from the big bucks members who used to go to L.A. Fitness for 29 bucks a month. And now they’re having to reserve times to go workout and they have an hour to work out and they don’t necessarily have access to the kids club.
Matt [00:09:22] And, you know, there’s still a tremendous amount of people in there, despite social distancing your walk into a giant club and they just don’t feel comfortable. So they’re okay moving into the boutique space at the boutique price points and understanding they are going to come into a limited class size with ultra stringent, no-touch cleaning policies and procedures in place. And they are moving more towards that. They’re wanting to get in. That coupled with the fact that, you know, Quarantine is a real deal. Right. People are putting on some weight at their homes. They’re a little bit less active. They’re snacking. And here, again, if we can position ourselves as a solution, you know, as I said before, a solution for fitness, the solution for people coming back safely and effectively into this space. You know, we’re seeing a giant influx of members that way. So, yeah, I would highly recommend, you know, reserving a couple of spots if you need to in your primetime hours, one to three spots is my recommendation. And then opening up, you know, one to three intro only classes and making sure that you’re adequately staffed to ensure that you can service those individuals.
Matt [00:10:25] Remembering it is their first time in your facility. It is their first time experiencing your brand, your business, your company. And they need to experience a phenomenal workout despite, you know, twelve others. And there are eleven others in there that it’s their first time as well. You need to take care of all of them and then be able to service them if they’re looking to purchase a membership thereafter.
Mike [00:10:46] What kind of offers you recommend running during this time because of that? So, for example, a lot of people should do like free two weeks or free week, free five days pass the fear that you’re hearing from fitness studio owners is well, I don’t know if I have that many free spots available. So a lot of people have started doing things like a free week. But the caveat is one of those days within the free week can be an in-person, the other ones can be part of a virtual. Some people are just doing a free session or something like that, or it’s a free week. You can have one class now and then apply the other. Apply a full week towards a membership. I see a lot of people being creative. What are you doing or what do you think are some good offer ideas that you’re maybe going to be testing here?
Matt [00:11:35] Historically, the free week is is the home run offer, right? That is always the best response that we get, is those free seven days and seven days always sounds better than one week, right? Seven’s a bigger number than one. So that’s historically been the best response that I’ve gotten as far as putting that out there.
Matt [00:11:55] I’m currently running the first session free. Here again, I have a pretty large member base, so I’m more concerned with servicing my members, getting those members back and active. My recommendation is I would do anywhere between one and three sessions free to get them in and get them used to the workout, get them sold on the workout and then get them pre-booking.
Matt [00:12:16] And that’s something that’s huge. And that’s what I’ve preached with my team a tremendous amount is ensuring that we get the pre-booking for a multitude of reasons. The first one, Mike, I want you to have this plot when you come back. Right. So if you want to come in Monday at five o’clock, so does the rest of Arizona. Right. Hey, man, we got to get you in here. Secondly, is the accountability factor, right? You’ve been out of OrangeTheory, out of the gym, out of fitness, or whether your brand new to fitness, we have to restart this habit. You’ve been out of this now for two, three months, or longer. If you’re brand new to this and you just decide now’s the time, I want to come to the fitness space. So we have to recreate that habit. We have to rebuild that. And what I want to do is ensure that you have this habit built. So we’re going to prebook your sessions. And, you know, our members are super thankful for that. And it’s the conditioning of our members. And it’s really important that we do that. We’re conditioning our members to rebuild that habit and rebuild, coming back in on a regular basis that they can secure their spots as well. Because our goal at the end of the day is member experience. We need to deliver more wow moments for our members that we deliver moments. And that’s one way that they can actually take that and help to ensure that we are delivering those wow moments.
When You Reopen Your Fitness Studio Reopening, Here Are “Members By The Numbers”
Mike [00:13:22] Now, your performance consultant right now too. I don’t know a lot of fitness studios here through the Loud Rumor training. What do you what are you hearing as far as percentage-wise? How many people are open already? How many people are not open or general then and then what does it seem like? The people that are not opened, are they all afraid? And the people that are open, are they all excited? What do we see with your clients?
Matt [00:13:52] Yes, so with the clients, I’d say less than 50 percent are open.
Matt [00:14:00] As far as brick and mortar doors open, right. Arizona wasn’t hit very hard with Covid-19 and wasn’t hit as hard as the rest of the nation, I’ll say. That said, there’s their solution, right? There are ways around this. So, well, you know, 40, 50 percent of our clients are are open brick and mortar.
Matt [00:14:20] The others have pivoted. And that’s what you have to do because at the end of the day, doors closed. We are mandated to close. Nationwide, it’s the first time ever this industry has had every single owner and every single business in this space be in the exact same spot. It’s never happened. So those that were successful have to pivot, right?
Matt [00:14:42] We’re all sitting on some sort of cash reserve. No matter how large or small that number is, we’re sitting on this cash reserve. So we’re either going to do something to project, some sort of upward trajectory and move us in a more positive direction, or we’re doing nothing. And we’re slowly bleeding out. Right. Expenses don’t stop. And that’s the scary part. Expense isn’t stopping. There’s no end in sight because we don’t know when we are able to open. So what I’ve done is coached a lot of these clients to move into the virtual space. Right if they’re part of a franchise of the franchise, has allowed them to do so or, you know, giving them the tools to make that possible or if there’s a dependence. You know, they’re truly moving in this virtual space. And as we’re seeing, you know, in every industry across the nation these days, we are moving to a more virtual space there are so many more remote jobs and work from home. We’re learning as a nation how to make that happen. So it’s really cool that we’ve taken the fitness space in the fitness industry and pivoted from the brick and mortar. And really moved away from the personal touch and the community that we’ve built. And we have really learned to do that in the virtual space. So we’ve put together the yes platform to really, really propel businesses through there and the fantastic part is.
Matt [00:15:57] we’ve actually seen some of our clients come.
Matt [00:16:02] Out of this or move through this and net more members than when they were closed, pre-COVID. Right. So it’s insane to me. So you close with 300 members. And right now, while you are still closed, you have 305 paying members. It’s mind-blowing to me, but it just goes to show that there are solutions that you position yourself as that solution. Use the resources available to you. And you really take part in some sort of coaching and consulting program that you can have a very successful business despite the turmoil that’s happening around.
Mike [00:16:38] Yeah, we actually did a survey with five hundred and twenty-five in a group with five hundred twenty-five fitness studio owners and managers that we have and of the participants. You’re right. More than half who was fifty-two percent of them have not been, are not open. Thirty-seven percent are open. The rest are not open and still waiting to even find out when they may open. Like they don’t even have a date. Thirty-six percent of all of the participants have added between fifty to ninety-nine members at eighty-two.
Mike [00:17:12] One hundred and nine eighty-two hundred and ninety-nine dollars a month in recurring revenue in a virtual program only which they created during the quarantine. Only they didn’t have it. They created during quarantine in order to help them create cash flow and also keep their members paying regularly and engaged throughout the pandemic because they did know how long it was gonna go.
Mike [00:17:35] In some cases, it’s still going right. Many caseworkers is still going. So when it came to a virtual platform, that was a really good move. A lot of people are actually talking about continuing it indefinitely because it’s proven to be a really good arm of revenue. Which is good. And we’re always looking for ancillary sales. That could be a new one.
Matt [00:17:53] For sure. I mean, you were able to at this point, expand your marketing ring, right? Typically, we look for about a three-mile radius of our brick and mortar, you know, Myanma, before we don’t even typically market to that very heavily, if at all. We’re talking five, six, seven miles. Like, I’m not touching those individuals on any of my marketing platforms, whether it’s direct mail, you know, organic pieces, you know, interactions with my teams, business to business, anything like that outside of a three-mile radius.
Matt [00:18:20] I typically don’t touch the beauty of social media. The beauty of the virtual space is now, you know, I think of one of our clients and he actually just said he signed up a member in Chile. Yeah. Right. Mine’s a U.S. based business veteran-owned. Fantastic guys who own this business. And they signed up a member, they’re headquartered out of the East Coast, out of Virginia, I think. And they signed up a member in Chile. Right. Like they would have never, ever marketed to this individual, ever. But somehow, unbeknownst to them, they received this marketing, you know, whether it’s organic through Facebook or social media or whatever it was. And they now acquired a member in another country in this virtual space. And that person is helping contribute to their cash flow. It’s mind-blowing to me. And it’s so awesome that people have learned and I’ve been able to make this pivot and it’s sure that they’re keeping afloat.
Matt [00:19:13] And like I said, ensuring that they have cash flow, that they can bring back their teams, that they’re still servicing in their members. It’s really, really cool. Yeah.
How Fitness Studios Are Generating Revenue After Reopening
Mike [00:19:21] So I’m going to go into some numbers here, especially how you’re able to generate money because you found some ways to generate some ancillary sales to make up for the profits that you’re not getting by filling up your classes as much as you’d like.
Mike [00:19:33] And so before we dove into that, though, I’m going to ask, man. You are running these studios. Quarantine hit you in a unique position where you’re your studios are part of a franchise where you weren’t able to collect dues, so you had to just wait it out. Right. You could generate money even if you wanted to. Right. You’ve waited it out.
Matt [00:19:53] Yeah, March 17th, I flipped the, flipped the switch off. Right. All of the studios in the state of Arizona, we flipped a switch off. So all seven of mine and all the other ownership groups flipped off. My revenue went to zero.
Mike [00:20:07] But you still had employees and you still had costs. And you still had rent. You said all that stuff right?
Matt [00:20:14] I had payroll, right. Three days later. Right. My, my payroll was due on the 20th of the month. You know, so I had my landlords, you know, hands out on April 1st asking, where’s my rent? Right.
Matt [00:20:25] But the overhead of all the insurance and the utilities and everything else. Right. Yes.
Matt [00:20:30] It doesn’t stop and unfortunately, so did my revenue. So, I mean, turn the water off and try to fill up your water bottle like it’s just not there. It’s a very scary place to be, you know, especially with any sort of personal guarantees that you have on any outstanding loans or leases and things like that. It’s a scary place to look and see like this is your life’s work of the last decade of my life, you know, and it’s at a tipping point right here. Like, I don’t know what’s going to happen. I don’t know how I’m going to generate cash flow. I don’t know what this looks like long term. I don’t know where the end in sight is. I don’t have that light at the end of the tunnel. It’s not, hey, you’re going to reopen it 30 days from now. We don’t know. So I was closed for over 60 days. And it’s a really scary place to be.
Matt [00:21:14] There’s a lot of processes that went to place as far as even negotiating with landlords and, you know, working through that process to ensure that, yes, we were in a financial position to reopen, to retain the staff, to be able to service my members again. And that’s a really scary place to be.
Mike [00:21:31] Well, as scary as it was, it got scary over time as the date kept getting pushed back. And then just where you figured out you’d be able to open up just when that date was released. You broke both your knees at the same time.
Mike [00:21:48] Well, how did that happen? Does that even happen?
Matt [00:21:51] Yes, I was I was helping my parents move, actually some fitness equipment. Right. A piece of cardio equipment. And I was walking backwards carrying half of this equipment and didn’t see the ramp to get up into the U-Haul, tripped, fell backwards and went down and went down hard. I didn’t really realize what had happened until I looked down and my knees were a mess, man. Originally, you know, I couldn’t get up.
Matt [00:22:22] Everyone realized the severity of the situation. Hey, let’s call 911 real quick. You know, you have a two-hundred and eighty-pound man laying on the ground. And I laid there in the fetal position. Knees are bent like I’m. Something’s wrong. Right.
Matt [00:22:36] Fire shows up and they said it looks like you’ve dislocated both kneecaps and me having a little bit of, you know, AP and anatomy, physiology, background, and knowledge. I’m thinking like, OK, dislocated kneecap. That’s the best-case scenario, right? That’s OK. You know, they’ll have me bite down on a stick and scrape my leg and pop it back in. Call it a day. Right. It’s going to hurt a little bit for a second and we’ll be done. You know, as I laid there, I wasn’t in a tremendous amount of pain. And that’s not me being a tough guy. I’m not sure if it’s adrenaline or I just have a crazy guy pain tolerance, which you and I have talked about before.
Mike [00:23:10] Well, that’s a what’s the name I gave you? Hold on. Hold on. Rhino Cane. Because Rhino, you have the pain tolerance of rhinoceros on novocaine. That’s what I think I said.
Matt [00:23:21] Yeah. You know, it’s hell and it’s not playing the tough guy. It truly is a decently high pain tolerance, right? The pain threshold is pretty high. But I’m laying there and I’m like, something’s wrong. Like, I can’t bend my legs at all. Like, I can’t straighten them. They’re stuck where they’re at and something’s wrong. They’re obviously, you know, physically they look pretty bad. Fire shows up to get me loaded in and end up taking me to hospital.
Matt [00:23:45] You know, as time progressed and that day went on, I learned that I tore both patellar tendons and some other surrounding and connective tissue in them. So I literally had not much connecting my, you know, upper leg to my lower leg that was literally hanging on by strings. So that was the that was.
Matt [00:24:07] Interesting. That was a week before I knew I was opening, so.
Matt [00:24:11] Wow. Let’s talk about the crushing blow.
Mike [00:24:15] Now, one of the things that the reason you have so many, you know, consulting clients between you and Corbyn here at Loud Rumor is because it’s not so much that you guys have been able to run businesses, run studios, and it’s not so much because you’ve been able to grow them, but it’s because you’ve been able to grow them with an incredible staff that’s been able to run them without you having to be there. Right. And so that’s important. Was it that you built a business that way during you having two broken knees?
Matt [00:24:46] It’s hugely important, I mean, I was confined to I had surgery that night. It was that that dire that they fixed it that day. Right. So this happened at eight or nine o’clock in the morning. And by eight o’clock that night, I was in surgery. So literally twelve hours later I was in surgery. You know, I came out at, I don’t know, midnight that night. And, you know, all I’m thinking is how am I going to do this? Right. The doctor told me literally I was in preop. That was the first time I met the doctor, first time I had spoken to really anyone about this. And he says, OK, where to go in here, we’re going to make this incision. We’re going to reattach this. We got to do this. And then four to six months, you’re going have to learn to re-walk. All right. You ready?
Matt [00:25:28] Wow. OK, sign here and I’m thinking like, what just happened, right?
Matt [00:25:35] So, like, you know, you always have a sense of anxiety or angst prior to going, you know, under anesthesia to into surgery. If you haven’t experienced that before, it’s something no matter how calm you are, there’s always a little bit of, you know, anxiety about it. Right.
Matt [00:25:49] And then he tells me, thirty-three years old, you would literally have to relearn to walk in four to six months.
Matt [00:25:58] OK. Wheels mean surgery comes out of surgery.
Matt [00:26:02] And I was in some excruciating pain. Right. So I had to go through the pain first. Once they somewhat managed my pain. Yeah, that was my first thought is how am I gonna do this? I have to reopen my businesses. I’m responsible to, you know, a hundred and fifty employees, thousands of members. I have the green light to do this. I have to turn the revenue back on. I have financial responsibilities.
Matt [00:26:29] How am I going to do this?
Matt [00:26:31] Right, and it didn’t go without incident, right? I lost some staff in this process and I lost some very key staff, some staff that had been with me for years and years on end for a multitude of reasons. But, yeah, even those key players, I had to really, really call them back and say, hey, I’m in dire straits. I, I need you more than I’ve ever needed you before. I’ve taken care of you, I feel like for quite a few years.
Matt [00:27:01] Can you do me a solid and come back and help me out through this process? I truly, truly need you.
Matt [00:27:08] And they did. Right.
Matt [00:27:09] So taking care of your people is huge, you know, making them feel appreciated.
Matt [00:27:16] Building a culture where they want to help, where they want to rebuild, where they want to regrow the business is huge and I’m very, very fortunate to have a lot of those individuals on my team that are ready and willing and said, OK, yes, let’s do this.
Matt [00:27:36] I’m ready to go and make this happen.
Mike [00:27:42] You in the back. Yeah, I know.
Mike [00:27:47] You’re at the house where you have. Is that what you do? You have another business, dog trading. Right.
Mike [00:27:52] Yes. Is that the place or you stay in there? Yeah.
Mike [00:27:56] Meanwhile, by the way, as a quick side note, before we jump back into the numbers of fitness here, Matt’s dog training company has trained the hell out of my two dogs as well. And I’ve got two very obedient dogs just sitting there right now smiling, which is very, very cool.
Mike [00:28:10] All right. So.
With Smaller Classes After Reopening Post-Coronavirus, Fitness Studio In-Person Spots Are More Valuable Now
Mike [00:28:13] So, yeah, you got these studios now. Half classes, you’re going to have more time between each class, which means you can’t serve as many people that can cut your profit. But we talked a lot about ancillary sales and finding ways to generate income in other ways. So obviously, we talked about the virtual platform that one makes sense. But you also talked to me about penalties and fees. So talk to me about that a little bit more and what you charge when you charge it and how those numbers add up at the end of the day.
Matt [00:28:44] Yes. So, you know, now more than ever.
Matt [00:28:47] We’re called late cancel fees, right? Are really important to us. You know, and it’s I hate to even say that it’s a penalty to our members.
Matt [00:28:56] My team brings it as a positive. Right. It’s an accountability piece for us.
Matt [00:29:02] And it’s a way that we can reserve your spot just like you would in a hotel reservation, in a hotel if you don’t cancel that in time. You know, here we are. And we are holding that room that someone else now can’t use either. Right. So I’m going to have to charge you for it. So in lieu of charging them anything astronomical, we charge them twelve dollars. Right. And that’s their late cancel fee.
Matt [00:29:25] Now, envision if we have no say two those per class and we have 10 classes a day. So that’s one dollar per class that we’re able to, you know, get ancillary bills. But more importantly, that. Twenty four dollars. I’m actually a.
Matt [00:29:43] An additional two members.
Matt [00:29:45] Right. If you cancel or you don’t show and someone else doesn’t show and it’s you know, I’m able to move two people in off the waitlist.
Matt [00:29:52] I’ve now take care of two additional members in addition to that.
Matt [00:29:55] Yes, we do charge up for that accountability factor and for the fact that you held that spot from someone else. So now there are two widows per class. That’s twenty-four bucks. Say I’m running ten classes a day, that’s an extra two hundred and forty dollars per day, you know, over the course of, say, 30 days, I mean, that’s a tremendous amount of money. We’re talking that’s almost 70 bucks. That’s crazy. That’s all bottom line.
Mike [00:30:19] I’m typing that in here and putting it up on the screen, so twenty-four dollars a class. If you get to class at twelve dollars a class, you break up as many classes. Do you have a day into the month? That’s seventy-five dollars. And that really just goes right to profit. No cost associated with that. Plus, you opened up two more spots for people who can come in, even if it just offers. Right. Right. Perfect. Other ancillary sales that you got and you guys have, you don’t do supplements where you’re at. Right. That’s not a part of your guys’ system. You do have heart rate monitors. Right. And so talk to me about the heart rate and how well, what are the financials look like around that?
Matt [00:30:57] Yes, so the heart rate monitors for me, the heart rate monitors are presented with every membership. It’s not really an option with our memberships because that’s what OrangeTheory is, right? We are heart rate-based interval training. So without having the heart rate monitor attached to the membership. Unfortunately, any heart rate based, you know, training becomes a very expensive workout because we don’t have the science behind it.
Matt [00:31:19] Right. And that’s what we preach. So the heart monitor comes with the monthly membership, which is great for new members and new membership sales, a decent profit margin on that. But it doesn’t help my existing member base. Right. So all that does with my existing member bases create that stickiness factor so that way you don’t ever decide, hey, this just becomes a really expensive workout. And no longer is this, you know, the OrangeTheory workout that you’re going with there. So definitely a heart rate monitor wants to ensure that you’re if you’re running a heart rate-based, you know, work out there, that yes, I mean, you want to create that stickiness factor. And what that does more than the ancillary sales right up front is that it provides member retention. Right. So instead of 90 days, not look at nine months, you know, and what that adds up to over the course of those. Something that I joked with some of the clients and I say joking because it’s it almost sounds so minuscule, but it’s crazy. And I know you kind of talk about that as well, but water sales.
Matt [00:32:17] Right. So with COVID-19.
Matt [00:32:22] Thing to keep things safe.
Matt [00:32:24] We are shutting down and no water fountain and the fill bottle station and all that stuff, we shut that down. Kind of takes that off and said, you know, we want to ensure the safety of everyone. Let’s keep this close for now.
Matt [00:32:36] We do sell water. The front, right? We sell bottles of water for a dollar. Right. And I was thinking like a dollar. You’re not going get rich off a dollar Matt. You’re right. I will never give up a dollar. But when that bottle of water cost me six cents and a dollar, you ask any business person, the entire world, you call Mark Cuban and ask him right now.
Matt [00:32:55] Right now. And he’s like, that’s an insane margin. Right? And it is. It’s an insane margin. But more importantly, I’m providing a solution to my members who. Oh, shoot, I forgot my water. Oh, shoot. I didn’t bring water. No problem, you want me to bill this to your account? Yeah. It’s only a dollar. No problem. Right. So we’re providing a solution there. We’ve gone through a tremendous amount of water over the first week that we’ve been open like cases and cases of water. Hundreds and hundreds of bottles of water to where, you know, six cents apiece. Ninety-four percent more than that. That’s pretty good.
Mike [00:33:25] Yeah. Yeah. There’s uh, there’s really great book I’m reading right now. Have you ever heard of Claude Hopkins? Yeah, so he wrote up this book. You can see with the light, but it’s my life in advertising and scientific advertising. He’s the reason we all brush our teeth every day. His ad. So toothpaste been around before him like five, six other brands. But he’s the reason that we don’t brush our teeth like we put on sunscreen where it’s just when we’re about to do something that we would want clean teeth for. Right. People put on sunscreen because they’re about to go outside in the sun. And people used to brush your teeth when, like, they had tooth decay or they were about to go out. That’s pretty much it. Whereas now it’s like it’s a normal thing. And you can’t even believe that there was a time where that didn’t happen. It wasn’t even too long ago. And he’s the reason we wash our clothes as often as we do. We used to just hang them up over the balcony or over the ledge and let them, like, air dry out. And that was pretty good people to wash our clothes every time they wore it, not even every few times. The reason we actually Febreeze even blew up. This guy’s pretty incredible. And he’s one of the best advertising in the world. And one of the things he talks about is creating a habit where you have a trigger or a cue and then you have a routine and then you have a reward. And so the trigger was, OK, feel your teeth. If it feels like it’s a little like filmy, that means you probably want to brush. But every morning, if you don’t have that minty flavor that’s signed to, then the routine is brushing every morning, right. Every morning, not every day, but every morning when you first wake up because that mouth, you’re going to have that taste and then the reward. The reason a lot of people didn’t actually get their toothpaste off the ground was that they didn’t have that signal that I actually accomplish it. So he added that minty flavor, that minty flavor didn’t exist. It was just a normal oily type texture. Right. And so now that reward now, you know, you cleaned your teeth. Now, the same thing goes for laundry the way it smells. And Febreeze, but we talked about other examples as well in this book. And with fitness now wondering, I’m wondering how we can actually create that habit. Like, I actually had a Mountainside Fitness for about two years. Here was a habit I had for about two years. I worked out after I worked out, I immediately went to the smoothie bar and I got a smoothie and I left and I ate. And it was weird not leaving. You got to the point where as soon as I was doing my workout, my body just went there. I didn’t even think what a habit is. Right. But think about the margins that added. I paid forty-one dollars a month for my gym membership. I paid about four dollars per smoothie. I worked out, let’s say, 22 times per month. Right. So twenty-two times for I spent eighty-eight dollars, more than twice as much on smoothies and I did my membership. And that has higher margins. And it does a membership because it doesn’t have the payroll costs and all the stuff that comes along with it. So. Well, we talk about companies like Mountainside McDonald’s, right? They don’t make their money off the burger. They make their money off the fries and the shake. So I’m wondering if we could do something where there was a message aligned with, hey, guys, after your workout here, make sure you get an ice-cold bottle of water like doubtless, you want to have immediately, as soon as your workouts over, get it down to first and you wanted to replenish your body, get it in and make it ice cold to there’s that sensation, that cold feeling going down after there. Do you feel it when you’re hot? Right. And then we can just try it. We get increased water sales because if you have right now 12 members if we get nine of them or eight of them to get a bottle of water every time, make an extra seven or eight dollars per class, at the end of a day, you made extra 70 or 80 dollars per day. That’s what extra twenty-one hundred dollars per month. Extra twenty-one hundred is like. Now, everyone listen, it goes twenty-one hundred dollars. It does seem like a lot of money. Well, it doesn’t seem like that much money. Give it to me. It seems like a lot of money out of your pocket. Right. But it doesn’t seem like a lot of money when it goes to it. So it’s a lot of money at the end of the year. It’s 24 grand, but a lot of money. Give me twenty-four grand a year. Right. Sure. So the money, you keep that habit going once your classes go to twenty-four, thirty-six members per class. You’ve now tripled your profit. That’s a seventy thousand dollar profit on just water. Right. Which is crazy.
What To Say To Fitness Studio Employees When You Don’t Have The Revenue To Pay Them
Mike [00:37:42] All right. Awesome. Matt, I got to ask the toughest thing, the toughest thing that business owners have to deal with, especially in a service-based business, is making the right moves for their people and having tough conversations. Have did you have to lower pay when reopening? Are pays adjusted if I’m a coach for you or a studio manager, front desk, or positions as a whole. Have you had to consider that and have you had to have those conversations to have that go?
Matt [00:38:14] Yeah, I did. Right. And it’s a hard conversation to have, and it’s hard to not feel like you are taking away from your team or it’s hard to not feel like you can’t provide what you could before.
Matt [00:38:28] And it’s more than just an ego blow. It’s you know, it’s a crushing blow. Right. It just hits you to your core. And it’s true. I mean, if you care about your team at all, it’s a very difficult thing to think about. Well, great. Now I’m going to, you know, potentially negatively impact my team’s life based on what I can provide. But I’m asking for a tremendous amount from them. And that’s a really hard conversation to have. That’s a really hard conversation I had with myself prior to having with them. Right. So I did lower some of the salaries for my managers. They took about a just shy of 20 percent salary reduction. My coaches who were making an astronomical amount of money prior to based on the number of heads in the class are now limited to a certain dollar amount based on the, again, the heads in the class. That’s not even putting myself in place. But, you know, the powers that be in the governing bodies, right. That is, you know, forcing us to adhere to these social distancing guidelines of things. So, yeah, I mean, my trainers have taken a pay cut and everyone is looking to see how they can make the most money possible? What I have done in reducing the salaries is I’ve restructured the comp plan for my managers and made it more growth-oriented. That was a very candid conversation that I had with a lot of my team was. Hey, I’m looking for utility players. I’m looking for those individuals who are coming back because the entire industry nationwide is in this unknown. We don’t know what we’re coming back into. We don’t know what that looks like. I don’t know what the cash flow looks like. I don’t know if I can afford what I was paying you before. But I’m asking you to trust me, and that’s I’m asking you to understand that I’ve taken care of you and that I will continue to take care of you. We’re just going to structure this in a way that is more production-oriented and growth and goal-oriented to where you can make the same amount of money, if not more, based on what you are producing to help grow the business back to where it was and beyond.
Mike [00:40:27] Love it, man. What about with the fitness studio owners that you coach right now? What kind of advice do you have for them? And, you know, obviously, a lot of them, as you said through the coaching, that, I mean, it’s awesome that you and Corbyn have been able to guide that light. A lot of them being able to be profitable throughout Quarantine, which is good. But now that we’re posting, we’re reopening. What are the words that you’re what are you telling them in order to get optimistic about the future? What do you get them excited about the future? What do you believe day and other fitness studio ownership thinking right now?
Matt [00:41:03] You know, if you do it right and here’s what I’m doing, Mike, I just opened up, you know, like I said a week ago right? I opened up truly a week ago. And I am literally doing everything that I’m telling our clients to do.
Matt [00:41:18] And that’s the beauty of that, right? I a manager, call me. I don’t know. It was 10 o’clock that Morganti girls texted me at the same time, 10 o’clock that morning. My manager is like, man, I got some new members up. I got some members up, got some members up. But in the day he’d sold 14 new memberships that day, doing everything that I told all of our clients to do, which is really cool. Like you ever have a business coach, you ever talk to somebody who wants to kind of pound their chests and say as they’ve done it, but they’re not actually doing what they’re telling you to do? Like, I literally did everything that I coach our clients to do. And it works, right? We ended up with some tremendous numbers out of the gate. They’ve continued on the rise like, you know, that same manager, texting me this morning. He has three membership’s up by eleven o’clock again this morning. And I’m like. Mind you, we’re running half capacity classes. We’re still in this Covid-19. There’s still stuff going on. And he’s like, man, another three memberships coming in. Hey, we’ve got people coming in here. Fitness is not dead. Fitness is still alive. All we need to do is be very, very transparent with our members. Make sure your team and your members know exactly what is happening. Makes your following these systems and processes and makes you take it seriously. Right. Because it’s not just an optics thing. Right. I want to ensure the safety of my team. I want to ensure the safety of my members. And I want to let them know, like, hey, we are the solution. And we position ourselves as that solution. And fitness isn’t dead. It’s not going away. It’s coming back. And it’s more lively than I anticipated, which is really cool.
Mike [00:42:48] Yeah. Do you recommend people advertise right now?
Matt [00:42:51] Absolutely. Here again.
Matt [00:42:55] They need to recognize that we are that solution. We have to be at the forefront of the brain. We have to show that we are alive and well. And we are looking to ensure that we can service and provide solutions to them because that’s what they’re looking for.
Matt [00:43:09] Right. We’re looking for some sort of safe place, some sort of outlet during all of these crazy times that we’re going through. Now is the time. And with the Facebook bidding system more often than not, we’re going to see are ad costs and our lead costs lower than they were pre COVID. Now is the time. Let’s generate this pipeline. We don’t know what our member base coming back in is. So what we need to do is make sure that we’re adding fuel to that fire, adding new members to that to ensure that we can sustain the business. So, you know, if you’re not spending money on marketing, you’re doing something wrong.
Why You Need To Take Advantage Of Advertising While You Reopen Your Fitness Studio
Mike [00:43:42] You know, that was one of the things that we actually did in our research and survey as well. I’m going to share some numbers here that are pretty cool and pretty enlightening as well. Let me see if I can find it here. The lead costs have gone down quite a bit. Here we go. So over the last seventy-six days, we did research the average ad budget for each studio that participated during this program was one thousand six hundred eighty-six dollars and fifty-one cents per month. That’s what they were spending on ads per month during this time. And then what we realized was the lead cost was down by nearly 32 percent. As of right now, lead costs are down about 32 percent of what it was in January, in February. So it’s down by 32 percent.
Mike [00:44:31] But over the last seventy-six days, it was as low as twenty-five times less than averages that we saw in January, in February. So what this meant was as lead costs around fifteen dollars, if, let’s say you had a lead, costs about fifteen dollars and 50 cents per lead, if that’s what you were paying, you may have seen lead costs as low as sixty-two cents at your lowest during Quarantine which is pretty cool. Right now, obviously you may see more like ten or eleven dollars versus fifteen fifty. But still, when you do the math on the number of actual leads you get without increasing your budget. It’s really remarkable. Also what’s really great is the people that are like, oh, I don’t know if people are ready to buy yet. Well, you can afford that. And so another research we did and so we broke down. If you’re used to getting leads at ten dollars per lead. Right. Let’s say that’s what you were paying. Ten dollars per lead. And let’s say you’re used to closing pre-pandemic. You’re used to closing at a 20-percent close rate. Well, that means if you’ve got 100 leads, it would cost you a thousand dollars for those leads. Right. Ten dollars a lead times 100 leads. But you would have closed 20 of them if you had a 20 percent close rate. And when you do that math, you spend a thousand dollars, you get 20 members. What that means is you pay 50 dollars to get a new paying member.
Mike [00:45:47] Correct. With that. OK. Now, check this out.
Mike [00:45:52] If a lead drops down to, let’s say, two dollars per lead, just 5 times cheaper, you could technically afford to close five times worse than normal and end up with the same cost per acquisition. Right. So in this example, a thousand dollars would get you 500 leads. And if you closed only four percent of your leads, which is five times worse, closing rate, if you closed only four percent of your leads, you’re still ending up with 20 paying members at 50 dollar cost per new member. Cool thing is, what we are noticing is even with it is it is a lower closing rate. People aren’t closing as well for three reasons. Number one, they’ve never sold over the phone. They’ve never sold virtual and they’ve never sold during a pandemic. So rightfully, it makes sense that we are closing at a lower percentage. But it’s not as lowest. It’s not as low. So what that means is when you do the math, as long as your lead costs drop by an amount, that’s higher than your conversion rate.
Mike [00:46:49] Right. Dropping. So if that is, you actually can still end up better with better numbers overall now than you did before because you’re paying less per lead, less per acquisition, and therefore you can close at a lower rate. As long as that rate is not too much lower than you’re able to actually make out and your marketing return better than you did during a booming economy. When everyone’s running ads, when everyone’s got options and everyone’s got opportunities. You’re competing against everyone. Right now, your competition, everyone’s complaining right, to saturated, too saturated not only in the marketplace but on Facebook and Instagram to saturate where you go.
Mike [00:47:28] Now we’ve got that out of the way.
Mike [00:47:31] Well, here’s what you want. So pretty cool, actually. Going to be posting more numbers. We’re going to be doing a lot more of these studies and research. So anybody that wants to get these numbers. And so as you go to LoudRumor.com and get into our insider e-mail list and we’ll actually be sharing that out with you. Also, if you want to learn more about working with us, so you can get into the group. We share these stats live all the time. Call (480) 567-9794, if you work closely with people like Matt regularly, you can go ahead and call (480) 567 -9794 and we’ll go ahead and get you guys plugged in with Matt, Corbyn, other studio owners that are crushing it right now. And uh, right now we got five hundred and twenty-five people in that Facebook group that are just itching to share what they’re doing and how they’re doing it. They do it every day.
Mike [00:48:15] So, Matt, thank you so much. Man, I appreciate it. Any other and anything else you want to add before we head out?
Matt [00:48:23] I think we covered it all, man. I’m very grateful to have had you have me on again and accept fitness is not dead. Do it right. And you will win.
Mike [00:48:33] Bomb drop right there. That’s bomb drops. I got the sound effects now on my switchboard and I could do that. I could do this because this is for you… Alright man, for everyone watching, for everyone listening, thank you so much for tuning in. Matt, thank you so much for being a guest again. We will see you next week.