This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The fitness industry was not impacted equally during the pandemic. Those within person facility, storefronts, Jim's Man, they were hit pretty hard. Those who could pivot quickly, often to digital fare at a lot better. Some, including fitness equipment prior providers, think Peloton fed pretty well during the pandemic shutdown. Here with what's going on though
in the world of Crunch Fitness is Ben Midgeley. He is CEO and founding partner of Crutch Fitness Franchising, and he's on the phone in New Hampshire Crunch Fitness franchise. Let me slow down, Ben, so I can get it right. Say it five times fast. Hey, how are you great? I'm doing well. Uh. You know, it's an interesting day where we're being told by the CDC we can take off our masks inside if you've been fully vaccinated. What's going on in your world and how does it compared
to where we were a year ago? Well a year ago. Yeah, we shut down around March fifteen, the holy industry shutdown out and it was extremely hard on us and our franchise. These were primarily a franchise based company. Um, the owners had to really dig in and do a lot of things right to make it out the other end. But a year ago, if you look at March from March, we actually, I believe we're the only major brand that
actually increased our members of the last year. We were at five points six percent, while our primary competitors were down anywhere from twelve to thirty five percent. So even surprised us a little bit. It was a fantastic outcome. And there's a lot of things they have to be right along the way, but you know, we were coming out the other end a bit stronger than we thought we would, and we're really excited about what what's going to happen that the surge is going to come. Well,
I want to hear positive surge going forward. I want to hear about the future. Why do you think you're up five percent? What did you do? What are members telling you? Why are they coming back? Yeah, So, you know, we look back at that a lot, and what was interesting is if you look at our existing member base, which I think is where most of the health was lost, we only had a two percent dropped in our existing members, which was fantastic, and then when we reopened, I mean
basically all of them came back very quickly. And we think due to a couple of things. One is the community field you get in the clubs. I think a lot of people are just missing that interaction due to such an elongated shutdown. Our clubs were in the low price, high value space, but we have a lot more in our clubs and most competitors do. You've got the weights, you've got group fitness, you've got the rod, you've got
hit classes, personal training, you know, relax and recovery. Just a tremendous amount of things, so more reasons I think to come back to the club than some of the other clubs might offer. And then UM member trust was big. You know that the trust for our members that we were doing the right thing for them was important. We stopped feeling when we should when some other brands didn't.
I'm sure you saw that in the news that that's what I wanted to just remind us what you did, because I know that there's been places that I supported just because they were small businesses and I didn't want to see them go to the downside, so I was still paying. But what did you guys do did your members to keep the membership? Uh? Intact? Did you wave monthly fees? What did you do? Well, we build every day in our business, So if you joined on the you know, the twelve, you get built on the twelve.
So as the days came up, which we closed around the fifteenth and the sixteenth, we begin to stop building people immediately after that. Now there was a little bit of a rolling closure depending on the different states. It didn't all happen within two days rolled in, but then we sent out guidance to all the clubs and the franchises.
You know, they're independent business owners, but they're extremely receptive and from a company standpoint, the best and the right thing to do is to stop builing members immediately and
then you know, bill when you reopen. That's what we did, and some other companies took a little bit of a gamble and you know, continue to build or wait until that next half on the April one, and just figured we'll try that and that that obviously stung a lot of people, and that was the wrong thing to do, all right, So interesting, but that explains to how you were able to kind of hold onto your membership write
those numbers. Yeah, And I think the other aspect of that is, you know, the clubs took cleanliness really safely and safety precautions extremely seriously, I believe, we mean as they reopened, as they reopened even yeah, exactly. And prior to that, we were I believe the first club to have our our readiness plan out and to our franchisees. We had it out to them within three weeks of the closures. So that gave him a really good tool to work on to make sure they were prepped and
prepared to open. And then you know, the franchiseess did a great job with member communication, team training, and facility preparedness. So um, you know, it's it's all on their shoulders, all the credit and then of course the p PP loans, the ideal, all that sort of support that really helps
him get through it too. Yeah. We talked to Jim really over a crunch, you know, and he talked you know, I think we talked him about the reopening plan and it was pretty extensive, a lot of pages, if I recall, Yeah, it was it was about forty pages, and there was a was a really big team effort with their franchisees.
Jim led that process, of course, and then uh, you know it was it was important, you know, but it's one of those things that franchisees you probably look at and say, Jesus a lot of writing, But when you look back a year later, you think, hey, this was great to have. Well, you have a playbook now in place. Uh, And I do wonder are you guys planning for maybe
another shutdown in the future. Were are already talking with the medical community about the importance of booster shots and people are marking their calendars about I got the two vaccines, but six months now from now, I've got to get a booster shot otherwise we could see, you know, a flare up. Are you guys planning for figuring out how to maybe deal with another shutdown anytime in the near future? And we've got about thirty seconds and I'll come back
and talk. We're planning for it. I hope it doesn't happen, you know what I mean, We have it down, that's down for this type of a situation. I mean, the trick with business planning is you're continuency planning. How why do you go Uh? You know, you've got to look at natural disasters and all sorts of things. So we're trying to constantly expand our our contingency planning and emergency
planning for whatever situation arises. Okay, let's get back to Ben Midgeley, chief executive officer, founding partner Crunch fitness franchise, still with us on the phone from New Hampshire, So making your way back, Um, are all the franchises coming back? Did anybody have to shut down permanently over the last year, including international? We shut down a few clubs single digits. Some of them were pre planned locations were too small
or had to move them or what have you. But I'd say i'd say probably about four out of three n fifty were you know, pandemic related. And then so how are you thinking about the reopening trade and the reopening of the economy. It's something I gotta tell you, Ben, We are trying to assess day today. A lot of
CEOs and leaders aren't giving a lot of visibility. Still, I think we understand we're going to have a significant bounce back around now and maybe probably into the next quarter easily as things reopen and there's a lot of stimulus money out there, but how do you see it and are you confident to make some significant investments in terms of expansion at this point? Sure for us, I think we're certainly on the more optimistic side, and you know we're not shy about that for for a few reasons,
some not great, but at least for our industry. One is we've had a loss of a lot of competitors, which I say that with a heavy heart because you never want to see you know a lot of folks in the industry, which I've been in for thirty years, so I know a lot of these operators have have
lost the businesses. But it's estimated that about se of the health clouds of closing the industry, which actually during your break it mentioned the joint sentence sponsorship for the gim Zac, which is fantastic, So hopefully that that will get traction and get past and be able to provide support, UH support to industry operators. But there's a significant loss of competitors, which which needs there is more market share you have to go around. UH. Real estate is softening.
A lot of tents went out of business, so landlords have become much more open and accommodating to bring in thirty thousand square foot tenant that can bring you know, six seven thousand people into the center. So that's worked out really well for us. Our brands getting stronger, you know, as our footprint expands, we're getting more exposures, so more people are looking for Crunch to come in into the neighborhood. And the momentum we carried throughout the the pandemic has
really helped us. Right if we opened about forty clubs last year and we grew in membership. So for us, that's a really good sign. As things open up and people get back out, we've only got growth to go from here. So Equinuh, Equinox always say it wrong. Uh, you know them well, a competitor and they're talking about, you know, going public via a spack. How does that
potentially maybe some new capital being put into them? Certainly a well known changes like you guys, how does it maybe change the dynamics for you in the competitive landscape. I don't think it changes the competitive dynamic for us. Um. You know, we're we're in the game for a while now. We've got a longer term view. As you know, we had a transaction with TPG Growth just a couple of years ago. I know you and Gemen talked about that
several times. They're fantastic partners. They love the business and and they like like you, who have also invested in the business, were very focused on where we can take this. I think looking at Equinox, that's going to be interesting to watch. Right, that's really the first time something like that could happen in our industry if that works out. They had significant losses last year and they're looking for a big valuation. So we're gonna certainly keep an eye
on that. Right, see why happens with that, But it won't change our game plan going forward, Okay, it won't change it in any ways. It's interesting. Well, you know, it is fascinating to the private equity world. My former co host Jason Kelly has written about it and his his book Sweat Equity about you know, private equity and their involvement in the fitness world. How are they really great partners for you guys? Well, I mean every private
equity firm is different, so I can only speak. We've had experience with our current partner, TPG Growth is extremely engaged. They did a tremendous amount of diligence on the business. I mean, they're fantastic company obviously part of the greater TPG that you know has a tremendous amount of business ownership at spotting trends and how businesses are going to perform in the future. So um, you know, they did a lot of research on our space. Obviously, we've always
been bullish on it as management. I mean, we grew this company from no franchises ten years ago to almost sold right and we're approaching two million members here pretty quickly, so it's all worked out pretty well. And you know, TPG growth brings lot of sophistication into the business perhaps that we didn't have before. So we're just starting to take advantage of that and see those changes come into motion, which I think is really going to accelerate our growth
going forward. So one thing I'm curious about is what's next and the future. I'm someone who's done yoga for a long time, and my yoga instructor, who have started with for years, was able to do things digitally and she's really carved out a niche that she really wasn't doing before. You know, she was traveling the world, you know, teaching courses and teaching in her in her home town
as well. Um. But what's interesting is I was on a class the other day and someone was in Japan, someone was all over the country, and I do wonder about the digital role in the fitness business. How do you guys embrace it? Will it be important going forward or not as much as the world reopens in your view? Well, I think from that standpoint, in terms of the individual operators that he talked about, it's fantastic that they can expand their business right and getting people healthy, which is
the goal of the industry anyway. It cuted our goals to help people get healthy, So the more people that are exercising the better. In terms of digital is important. Obviously there was a boom in it. Um. I think any brick and mortar business has to integrate that properly. Most of the companies in our industry, they certainly don't have the jobs to go up against you know, Apple in that space, or or Peloton or you know some of these others Beach Body that have been doing it
for years. But you can certainly integrate really high quality content into your offering to supplement what your members are doing. We've been in the space for a while with something called Crunch Live. Our workouts, which you guys have spoke about before you know it jumped up to about a hundred thousand workouts the day. They've gone down a bit since then, but we've certainly looked at this as something we need to reinvest in and make an even higher
quality product because our members do appreciate that. That doesn't mean they're going to drop their health club membership and switch over it is. It is a supplement and as far as the greater industry goes, you know, there's sixty million members of health clubs in the US and prior to this pandemic the industry has going at three to four per cent for about ten years. So as we come out of this, we do expect that growth going to continue to grow at that rate, maybe even faster.
And then one thing that a lot of people don't think about is about thirty of the people who work out at home or have a UM, you know, some sort of supplemental exercise routine that they do also have to about membership. So it's not really either or you know,
option amend each other and grow together well listen. I really great to check in with you, and I hope we can do so again a little bit later in the year and see how things are going, especially as the world fingers cross masks off that we continue to reopen. Ben take care of stays safe. Ben Midgley, CEO and founding partner of our Crunch fitness franchising on the phone in New Hampshire,