Chantal: Derek, welcome along and thank you for joining us on The Fitness Business Podcast.
Derek: I am so excited to be here today. I’m looking forward to talking with you.
Chantal: First and foremost, I have to say a huge congratulations on your selection of Chairman of IHRSA from July of this year.
Derek: Well, thank you very much. I’m humbled by the opportunity and it really kind of opens my eyes to how large the industry is but also how small the industry is when it comes to people. But also the huge opportunity that lays ahead of us. And when I interviewed for the IHRSA board position, Alison Flatly shared with me the BHAG, the big hairy audacious goal for IHRSA and it really spoke to me and I’ll share it with you too.
So the BHAG for IHRSA is to be a primary resource to curb the worldwide physical inactivity epidemic. And when I heard that, that is something that motivates me every day, I’m passionate about it and that’s what I’m focused on continuing to make sure that as the Chair of IHRSA that we can continue to reach towards this goal.
Chantal: Derek tell me this, how does your role as the Chairman specifically impact that agenda for the organisation over the next 12 months?
Derek: Well, I think what we’ve got to look at is, what are the strategies that we’re going to do to help reach that sort of aspirational goal of curbing physical inactivity. And I think one of the biggest areas of opportunity I see is when you look at the penetration rates of the general population and what percent have a gym membership, it’s to me, it screams of opportunity.
You know, you’ve got some of the most mature markets, the US and parts of Europe where are the highest penetration and we’re not even at 20%, we’re only at 18.5% in the US, so not even one in five people in the US have a gym membership. So that’s the other thing that really motivates me because I know how beneficial it is to be part of a gym, to be part of that community, but also the exercise and health benefits you get from that, so I’m driven every day to say, how can we get to where, ultimately I would love it to where the majority of people, at least in the US and eventually worldwide, but start there, how do we get to where more people have a gym membership than last? And once you sort of hit that tipping point, it really is exciting.
Chantal: So tell us, what can the US fitness industry and the global fitness industry expect from Derek as the IHRSA Chairman?
Derek: There’s kind of, I’ll call it the three maybe even four main things I’ll talk about. One is, I think our role is to make sure that … It’s important that we continue to have young, energetic, enthusiastic, passionate people becoming part of IHRSA and being IHRSA members. And so one of the goals is, how do we attract more millennials to be part of the board and to be IHRSA members themselves? And I also think that that goes hand in hand with technology and how do we embrace it and how do we make sure that the fitness industry is utilising technology to really have a synergistic effect on growing the industry. And I don’t know that I’ve got the answer, I think we’re still working it through, we created a Technology Innovation Counsel last year that we’re going to continue. So that’ll [inaudible 00:03:13] is kind of one is attracting millennials and technology.
The other one that I’m really passionate about, one of the things that was holding me back from maybe being part of the IHRSA board is, you know I’ve been to 20 IHRSA conventions before I had been part of the board, but I hadn’t really always recognised who were the board members. I mean, they wore name tags and so forth, but one of the things that I really want to get after is having a high visibility presence for the board members during the convention and I want us to be dressed appropriately so we can be interacting with the vendors and giving them our personal feedback on some of the things that we’re doing. So the goal is going to be, you’re going to see a high visibility and leadership presence from the IHRSA board in San Diego in March.
And then the last thing, you kind of talked about US and so this one’s specific to US, but I also think that when things can happen in the US, it can also opens the gateway for them to happen internationally as well. So there’s a big push on the PHIT Act that really has been around and floating for almost 10 years now. But we have some great connections through some of our board members right now on Capitol Hill and I think we have the best timing ever to get this Act to pass. And what the PHIT Act does in the US, we’ve got a medical spending accounts that people can save their money into this account, pre-tax, so it’s money that doesn’t get taxed and you can use it on medical expenses. Well, we’re really excited about the opportunity to take some of this money and be able to spend up to $2,000 a year for families on gym membership, on personal training and on youth sports. And I think that this is one the, of all the years I’ve been in the industry, this is one of the legislative pieces that if we can get this passed, would have one of the biggest impacts ever on our industry.
And I do, as you start to talk about, how can we go from 18.5% to eventually 50% penetration of people with memberships in the US, the PHIT Act is one of those core enablers.
Chantal: In case there is anyone that is listening that isn’t familiar with the PHIT Act or hasn’t necessarily been involved and wants to have a better understanding, I’ll put a link in today’s show notes on some literature that they can read up and have a look. Because as I said, I know that there was a huge coverage of it at IHRSA this year and no doubt it will be the same coming up in 2018.
So I wanted to also because we have spoken a lot about IHRSA, so let’s talk a little bit more about you and your experience in the industry because you’ve been in the fitness industry for 23 years and many of our listeners may not realise your role in Club Leadership and I was doing a bit of stalking on your LinkedIn profile and there are some seriously impressive brands and logos on there. So tell us a little bit more about your career in the industry so far and also tell us about New Evolution Ventures.
Derek: Sure. Why don’t I kind of do this maybe chronologically and I’ll kind of go back to before I was even in the industry. I actually, my degree is marketing and kinesiology from Oregon State, so I was very passionate about fitness but also how do you get more people excited about being part of that?
But I ended up going a route and being in department store retail and wound up being able to move back home to Hawaii with my wife. And my wife ended up becoming the manager of the Gold’s Gym Waikiki. And when we would come home and share stories about our days, I found myself really longing for and almost envious of the things she was doing. She was motivating people to get off their couch and run in the Honolulu Marathon or taking people that had had serious injuries and getting them to be back to 100%. And this highly, highly motivated me.
So I went and met with the owners of the Gym at the time was Ode Hogan and Ode and I hit it off great and I thought maybe it would be a consulting job or something, but it turned out that he wanted me to be part of the team. So in Hawaii, I helped them grow from one to three clubs where I was running there, I came in because my background was more apparel, so I ran the retail. I introduced nutrition in those clubs and I helped them convert their independent contractor PT business to an in house.
Then a couple years after doing that, 24 Hour Fitness bought our clubs. I think they were surprised that we were doing the type of revenue we were in those categories out of just three locations, so they moved me up to the corporate office to help them get going. At different times in each of those categorises, the retail business, the nutrition business and personal training, the last eight years at 24 Hour Fitness, I ran the training and group fitness parts of their business. So I had 15 years at 24 Hour and then the company sold in 2006 and in 2008, Mark Mastrov, the founder of 24 Hour Fitness and Jim Rowley, who had been my boss for a while and a divisional president there and Mike Feeney, started up New Evolution Ventures and invited me to come be part of that and that was in 2009.
So the conversation was, you know, we don’t have any brands that we’re really doing yet, but here’s what we’re thinking. This is my breakfast with Mark and Jim. We’re looking at an acquisition with Crunch and I’d heard, you know, Crunch had very strong PR so I’d heard of crunch. We were looking at, we had three clubs in Canada that we were looking to have partner with Steve Nash. We were talking with Madonna on a brand called Hard Candy and we were talking with the Ultimate Fighting Championship for a brand called UFC Gym. And I took a leap of faith because I knew that these guys were years ahead of other people that I’ve ever worked with and just really great people, great family men and just great people to work with, and so I took a leap of faith and that was in ’09.
And now here we are with Crunch being at 60 corporate clubs and 250 franchise. UFC Gym went from zero clubs to now we have 19 corporate stores and 120 franchise locations. Nash we ended up selling that but I still do some consulting with them and they’re at 22 locations, the largest operator in Vancouver and they’re actually now a franchisee of UFC Gym. And Hard Candy is now 8 locations, all international. And we’ve actually added in some other brands. We partner with Alex Rodriguez and we have A-ROD Energy Fitness in Mexico. And we’ve got some fantastic operators in Selena Short and [inaudible 00:09:49] that are in Australia in Sydney and Melbourne operating Crunch, Hard Candy and UFC Gym. So the business has just grown tremendously and it’s been really exciting.
And so my role is that I kind of lean on all the things I’ve done in my past. So I head up the retail and I also head up all the personal training for all the different brands we do worldwide.
Chantal: That is just such a huge role, Derek. I mean to be doing that in addition also now as the Chairman of IHRSA. I mean, it gives me such a good perspective into your background, so thank you for taking us through that kind timeline.
So that we can share some of your knowledge and expertise with the listeners of the show, give us any tips that you’ve had in your experience when it comes to leading or growing the personal training department within Clubs.
Derek: You know, so it’s interesting, right? As we got kind of into our third brand and I was sort of, I don’t know if I was as strategic as I’ve even gotten now, right? And I was challenged by our CEO to say, “Hey, walk me through the strategy when you go into a new brand and how do you get this going?”
And so I tell him, you know, I’m big on acronyms but I have to do acronyms that are memorable. So I really kind of have an acronym for how to lead and grow your PT and it’s the 6 P’s. Right? And the first P is people, which is the most important part. You know, selecting the right people. Developing them and then when it comes to trainers, how are you going about finding them? How are you recruiting them? How are you onboarding them? And then how are you developing them at 90 days and beyond, right? And so people was first.
The next is products. What is it that you’re actually selling. You know, when we do 60 minute, 30 minute sessions, group training, nutrition, those are all the things that are the products that we’re going to be putting out there.
The next one, they kind of go together, it’s pricing and pay. So what are the price that you’re gonna establish for your product? But also, what is the pay? Now the issue is, you have to have established some margins that you want to get, so those to sort of need to go hand in hand. And I’ve been big on the way that we do pricing is sort of levelled so that a more experienced trainer has a higher price, but also can have a higher pay and have a great career working within the same organisation throughout their tenure of being a trainer.
Next is presentation, so that’s a couple of things. One is, what’s the presentation of our clubs? What’s the presentation of our workout floor and our functional training space? What’s the presentation of our trainers? How professional do they look and what is sort of the uniform we expect? And how do we actually present personal training to get people excited and want to make this purchase to help them reach their goals?
And then the last piece that kind of ties everything together is process. And process, you know when I go back to 24 Hour Fitness, in addition to people, the process was the thing that really was the differentiator. It was what allowed us to do something over 400 locations when I was there and really kind of replicate from one club to another, have some scalability to what you do, so the process and sticking to certain key elements of the process is really critical to success in personal training.
Chantal: Derek, with some of those brands that you just listed previously, what springs to mind for me with a lot of those, and I must admit also, visiting the US and going to some of the boutique studios as well, is just how strong the retail offering is in some of those places. And you mentioned that that is a big part of your background is the retail. Can you just give us a little bit of insight or perhaps some tips when it comes to growing the retail income line on our P&L?
Derek: Yes. So you know, the biggest part of the retail business for our brands and again I think we kind of lead with a fitness first mindset, right? Fitness is the key differentiator that we look at. We want to be the innovators in fitness. I like to talk about being at the tip of the sphere for all things fitness, right? So when it comes to that, we really, our first focus is on products with which our trainers can help our members get results. Because it’s all about results as far as how long people are gonna stay, how many people they’re gonna refer, what can we do to get them results?
And the number one area of retail business for us stems from nutrition. DotFIT is our partner that not only it’s about products, but it’s really about the programme. The programme is about, I know your height, weight, gender, age, which then means I know what you’re burning for calories, and I know what the calorie intake should be. And we’re gonna give you the right nutrition at the right time through DotFIT nutrition. So nutrition is far and away our number one retail category.
The second category and again, kind of coming back to the trainers being the key focus here, is workout accessories. Some of the key things we’ll look at there are foam rolling for self myofascial release, whether it’s from our partner trigger point or we’ve also introduced HyperIce, which actually has some vibration elements going on with their-
Chantal: I just saw that. I saw Amanda Vogel doing a product test on that last week.
Derek: Have you tried it yet yourself?
Chantal: I haven’t. I said to Amanda, “Does the fact that it’s got the vibration, does that make it any less painful than normal foam rolling?”
Derek: Well, you know, it’s interesting you say that because I do think that typical foam rolling without vibration does have some pain associated with it. Where if you’ve got vibration, you don’t have to go quite as hard on the roll to get some benefit. So I actually have found and one of the big things is, you can get the vibration helping you in the beginning when it really, really is painful to foam roll, and then as you start to get better at it, and the other science behind is that with the vibration it’s actually bringing more blood flow in there and taking out some of the elements that we’re trying to get out of our muscle so that we’re ready for a pre-workout.
Chantal: That makes a lot of sense. You’ve sold it into me. I’ll give it a try.
Derek: I’m a fan. I just actually did my vibrating foam roll this morning. My only thing is, I have to make sure I’ve got the garage door closed because I don’t want to wake everybody up at my house.
Chantal: Fair enough. So we’ve got nutrition and then accessories.
Derek: And accessories and even some home workout things. For example like TRX. If we teach the members suspension and even a little bit of the RIP Trainer in the gym, say they have days they don’t make it to the gym or maybe they’re travelling, this is something really easy to pack in your bag and take with you and now we’ve enabled you to still have success and stay in your, I’ll call it kind of your success routine, even when you’re travelling. So it comes back to those things.
Then the next piece for us is kind of that apparel and the branding elements and I think that’s maybe some of the things that you were looking at in the boutiques because I think boutiques are fantastic at doing these things.
Chantal: You know what, Derek, there’s a large portion of my pay goes towards the apparel in retail in gym facilities.
Derek: Well, and you know what, the good news is there’s a lot of members that are also doing that and they’re proud to wear the brand. If we can get them results and they’re loving being there, they want to wear UFC Gym or Crunch or Hard Candy, whatever the brand is that they’re in there and they want to represent, that has been fantastic for us.
And you know, there’s an interesting last piece of the retail business that sometimes isn’t really discussed but I think it’s important and I call it the I forgot business. You know, people show up at the gym and there’s many things that maybe that they haven’t brought with them that are important to the business and again I talked about my being an acronym guy, I actually have an acronym for the key four products that are in the I forgot business.
Chantal: Tell us what it is.
Derek: It’s LEGS. And it’s locks, earbuds, gloves and socks. And that actually makes up a decent chunk of our business.
Chantal: You’re kidding. Isn’t it interesting? I wouldn’t of thought that it would be significant enough of a percentage, you know, especially compared to those other three categories that you just mentioned.
Derek: It’s the fourth one, but again, there’s a large portion of the I forgot business. And think about yourself, that there’s been times that there was something, you wanted to work out and you open your bag and it’s like, “Oh, I forgot whatever.” You know, the other thing, there’s maybe a second “S” which is maybe men’s shorts. That seems to be another big one that is in the I forgot.
Chantal: Now, how on earth are men forgetting their shorts?
Derek: You know what, we’re men. I don’t know? I don’t have a great answer.
Chantal: Socks I can understand. But if you’re walking out without your shorts, I’m a little bit worried. Great opportunity to sell a bit of apparel though.
So Derek, listen, thank you so much for joining us today. There’s one last question that we like to finish off and we call this our FitBizperation and I’m hoping that you can leave us with a couple of quick tips on your top three business tips say for our FBP family regardless of the size of their business.
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Derek: So, you know, I talk about results so this first one is, focus on the results of your members and you will get results in your business.
Chantal: Great tip. And number two?
Derek: Number two is, your business is all about your people.
Chantal: Mm-hmm (affirmative).
Derek: And then my last one and I didn’t talk much about kind of, I’m big on kind of facing our fears. Like everybody’s got fears and even in business there’s professional fears and I didn’t really go through those, but last thing I’ll do is, turn your fear list into your to do list.
Chantal: Derek, thank you so much for joining us today. I have been looking forward to chatting to you. Congratulations once again on your appointment with IHRSA, very, very excited to see what happens over the last 12 months so thank you so much for joining us on the Fitness Business Podcast.
Derek: Thank you. I really enjoyed our time today it was a good chance to talk together, it was great.
Chantal: Oh, there’s one more thing that I just realised and that is, in my inbox yesterday, I had a note saying that the agenda is out for IHRSA 2018, how exciting is that?
Derek: It’s fantastic. I don’t know how the IHRSA team is even able to get like six months out in front of this. They’re amazing in the work that they are able to do.
Chantal: Just phenomenal, so guys, make sure that you jump onto the IHRSA website, check it out because already the keynote speakers have been announced, the overarching agenda has been announced so you can check it out now. And I think that registrations are already open if I’m correct.
Derek: I believe so, yes.
Chantal: Very, very exciting. Well, Derek, thank you once again for joining us.
Derek: Alright, thank you.
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