I am super excited to announce that we now have a formal partnership with the Prospect Wizard. And when I say wizard, I mean wizard. Obviously you have a website. This allows you to convert your website traffic visitors directly into leads. It's not just another chatbot and it's not AI but it allows a visitor to call, text or leave a voicemail immediately. Goes to you, your sales team or anyone else in the club
instantly. MIT shows a study that if you contact the lead within 10 minutes, chance of them converting goes up nine times that of the average. We got the Atlanta clubs on it. Vita Fitness, Gold's Gym, Mountainside City Fitness, Philly, College Park. Become one of the next Halo companies to deploy the Wizard. It's easy to use. Go to the prospectwizard.com get a free 30 day trial. Talk to my boy Dave Gallen. He will get you all set up and let the leads flow based on the Wizard. Go get him.
This is Pete Moore on Halo Talks nyc. I have the pleasure of bringing it to our audience. RJ Krohn, president, Extraordinary Brands, Extraordinary Studios, Extraordinary Wellness, Extraordinary Chicagoan. Welcome to the show. Thank you. The weather's about to change in Chicago, so get ready for winter. Well, I just attended my first Taylor Swift concert, so I am. I'm all heated up and ready for a day of Halo Talks. Well, we could use you in January. You can
come here, it'd be great. Sounds good. So look, you've got an interesting platform that you built in a pretty short period of time. So give our audience a little background on yourself and what you're building and some of the acquisitions you've made. Yeah, quick summary. Is been in franchising almost 20 years. Started off in the service industry. Wore too many hats. From a business coach to director of operations in a small franchise system. You touch a lot of things.
Learning management systems, operating manuals, call centers, company owned units. It's where I cut my teeth. However, I did transition. I got a phone call from a president of a company called Julie Cartwright. Her name is Julie Cartwright from PVolve. And she had an online on demand modality and that was in 2019. And she asked me if I was interested in bringing that to brick and mortar and franchising, to which I kind of
half jokingly said, you know, you're talking to a service guy. She's like, yeah, but this is a great conversation. We should continue. So a couple months later we had continued to talk and we decided it was the right move for us. So I joined April 13th of 2020, right in the beginning of COVID no one knew what was going to happen, but for us, it was a good time. We needed to be fully baked as a franchisor, operating
systems, operating manual, all those things. And so I spent the next three and a half years slowly awarding franchises, and we got to 40 franchises by the end of my tenure there in 2023, joined extraordinary brands. December of 2023. And we started out, we had a small cycling concept with Purvello. And then we really started looking for different acquisitions and the building the boutique fitness industry. In April, we acquired Eat the Frog. In May, we went and acquired Row
House. And then in August, we acquired Neighborhood Bar. And the reality was to find a diversified strategy for our franchise owners, but also for Extraordinary brands. So you have a hit workout, cycling, rowing, and then a bar space. So, you know, we've been pretty aggressive in our acquisition, but the most important things to us is making sure that our franchisees are profitable. Nothing. We can't award another franchise unless our
franchisees are doing well themselves. So our focus has really been on support and operational support. That's great. So I'm happy to say that Eat the Frog, Row House and Neighborhood Bar have all been on Halo talks. So I'm assuming that your next leg of this stool is going to be one of our legacy guests. So we will, we will help you go hunting through our archives for that. I'd appreciate that. So, look, you know, before COVID Hit Studios were definitely on a tear.
You obviously had Class Pass and gympass and some of these other groups out there creating a little bit of noise in how the system works and being able to sell memberships versus giving people the ability to go to, you know, different types of modalities through a credit system. You know, what gave you the, you know, inertia and confidence that, you know, we're. We're kind of going back in the direction that we were prior to Covid.
And, you know that the unit economics are something that, you know, as a franchisor, you like, hey, look, this is sustainable. Yeah, I think that those are different types of memberships. To be honest with you. There's a member that does fit into what ClassPass is looking for. They're looking for variety. They want to be able to taste a lot of different modalities. But I still think the boutique fitness space of, you know, the brands that we have are still being. People want to
be specifically at that studio. And it's not necessarily just the modality. It's the community. Right. During COVID there Were so many different conversations I heard about are people coming back once Covid's over to the studios? And the answer was overwhelmingly yes. Ben. And it's overwhelming you. Yes now. And it's just something you have to have you build. You
can't work out by yourself down in the basement forever. You need to be able to go to that 7:30 class and be with your for your friends to be there motivating. Get to know your coach, understand that the coach understands who you are and what your goals are trying to achieve. So I think it's an important thing is that once a member finds the modality and the space that feels very comfortable to them, then they have a long term commitment to that studio. So yes, there's always going to be class
pass. Honestly, at the beginning of our franchise journey when the studios are out there, we're advocates, it's revenue. Right. Let's get the people into the studio and then work on converting them into, you know, members of our current studio. And we've been quite successful with that. But I think it's not a, it's not a bad thing in the industry. Allows for people to go ahead and taste a few different things, little smorgasbord. But once they find the space that they like, they
stick. So you know, as you went to buy different franchisors and different brands, each one had their own, you know, DNA and evolution. So what are some of the things that you looked for in Eat the Frog which I met those guys, you know, a long time ago when they were just starting up and you know, just, just a ball of energy kind of like,
like kind of shot out at you row house. We've known Deborah for years back in New York when that was, you know, the first dedicated row and then neighborhood bar has done really well in, in some of these sub markets. Were there certain, you know, traits to say like this fits because I know that the brand has, has been established now I can kind of fine tune the unit economics or I can fine tune the franchise or
franchisee relationship. Yeah, I think they all have their unique niche and I think one of the things that extraordinary brand we like to look at is how is this available to everyone? Right. Just take Row House in particular. You could be 25, you could be 35, you could be 55. And I believe there's a woman in California that won the regatta at 70
years old that we did over the summer. And I think that's really important to where fitness is today is inclusive and there's a Gentleman that I used to work with at pvolve that was a large man, tall, and there was really like, he started going to row house in Cool Springs, and it changed his life. Right. He not only lost weight, his hips felt better, his knees felt better, and he lost a
significant amount of weight. And he couldn't have done that without a unique modality that allowed for you to work out 70% of your body, but at the same time not putting stress on your knees and hips. So when I look at it from our perspective, what we're looking for is some of the uniqueness. What are the things that are strong and powerful. Hiit is a particular type of workout, but what makes it unique. And I think that inclusive nature, you'll see with all of our brands that doesn't.
That allows for you to come in and feel comfortable from the very beginning, whereas it's not maybe a. A show that you don't want to be part of. It's making you feel comfortable and being inside your own zone to be able to be successful for your fitness journey. Yeah. One of the things that was music to my ears when you said we want to make sure all of our franchisees are profitable before we award and sell new ones. I feel like there's a number of franchising concepts that
maybe haven't figured out the special sauce yet. Just start franchising as if they have an operating or offensive playbook that they share with people, yet it's still kind of, know, wet or, you know, in version one. So when you. When you see that in the market, you know, and you and someone's deciding between different types of franchises, how do you kind of articulate to them? Look like we've actually got a franchising support team. You know, we know what we're doing here. We've got a lot of
experience. And, you know, you might be taking a flyer on something. But look at our. I haven't checked your, like, item 19 or, you know, FDD, but I always look at that and see, you know, how close are they to getting to, like, $2,000 a day is usually like a metric that I look at. And a lot of that's related to, like, number of classes that you have on. On the schedule. So what's your view on. On what's in the market? And you know, what maybe is causing some issues
with franchisees and other brands? Well, some of the conversations I have with franchise candidates, we don't sell franchise units. We award franchise units. And I think there's a difference there And I think when you, when you have that type of a situation it changes the con. Right. And I always tell franchise candidates, I said make sure you're, if you're talking to other other types of franchise businesses, make sure you're a cultural fit. It's no different than you going to work
for someone else. Make sure the people you talk to align with what you're thinking and how you feel and it makes sense because that's what's going to learn, lead to long term success, boutique fitness and franchising in general. You're really your top. It's a top of funnel leads and converting them into a membership. It's not, it's not rocket science. Your modalities, the thing that separates you from each each other. But really the, what we do on how we acquire members is not all that different
between different brands. But I would say also be cautious of, you know, looking at, we look at it from I'm going to award you a studio that makes sense for you and your family. Is one unit the one what you need or is it something that you're trying to do income replacement and you need three studios. I don't believe that we need to be awarding multiple packs, huge packs. I think it's trying to identify what the franchisee is looking for and aligning with their goals and making sure that they,
that makes sense. And I think those things kind of come across. So if they're wet behind the ear, whatever it might be, I think having those conversations shows the maturity of our system as well as the team that we have. When we bring into a Discovery Day, you're going to see, you know, director level and above individuals that are talking to that are experts in their space. I have no problems and it's a cliche thing to hire people that are smarter
than yourself. My team is tremendously more smart than I am. I could provide the vision. But they're experts in what they do and I think that gets communicated to the franchise candidate. Well, so there's, if there's a weakness somewhere, franchise candidates here.
This is Pete Moore. I want to let you in on a little secret. There's this company called Promotion Vault and what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away T shirts. What you want to do is build a rewards program that lasts, that people value and that doesn't discount your own products and services. So here's the deal. There's something called Rewards Vault.
The Rewards Vault is going to allow a member to set up their own profile. They are going to answer questions, you are going to get those answers, going to be able to target those members and you're going to reward them inside your club, inside your spa and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions. A lot of companies are cutting back
on rewards. You shouldn't be Promotion Vault, your answer, trust me, this is real. So from an operational standpoint and don't disclose things if you don't want to, but do you have a director or chief marketing officer for each one of the brands and a president of each one of the brands or do you basically say, hey, I got a chief marketing officer for extraordinary and we're basically managing these brands underneath.
I've seen it in different ways, but I feel like there's definitely a benefit of providing that brand across, you know, touch points and also see somebody who like wants to wake up and dedicate and say, hey, I'll meet the frog every day. I'm not extraordinary. So how do you think about toggling between the two? Well, I think marketing and operations are kind of separate when it comes to
that kind of a thought process. Marketing is a shared service that I think that in many of the boutique fitness spaces can be a shared service. A lot of the concepts are very similar. You need to have the flavor of each brand and make sure that it is specific to each one. But you're looking at right now Black Friday and soon to be New Year, new you. Those are very important times of the year for any type of marketing in the boutique fitness space. And I think a lot of
those things are applicable now. When it comes down to the actual unique modalities of training and coaches, I think it becomes more specific to that. You want to make sure that your master coaches are training your team exactly how to do the modality that is the product. Right. If you are a chef in a restaurant, that's the product. So we need to look at our trainers and say, hey, you need to be working with this individual that knows this modality inside and out because that's what keeps people
coming back. If you have a coach that's maybe not trained as well as they could be, it's going to be a bad first time experience for potentially a member and that doesn't lead to the membership sales. So our most important thing that we can do is be specific. Specific in how we train our coaches. Great. From a standpoint of exponential and what they had planned. I'm not really sure what the current Status is on XPass where they were going to try and basically sell membership or
you go to different brands under their umbrella. Do you keep these separate? Do the people at Eat the Frog as a franchisee, are they potentially awarded a row house or neighborhood bar? Do you want them to only be in one brand? And is there any interest later on of trying to do some kind of collaborative like co op marketing? No, I definitely think that the brands complement each other and I would say that, you know, any type we have, anytime we have an owner that's successful, I'd like
for them to be able to continue that success in another brand. And it's not something that I created necessarily. Other brands have done it, including premium service brands is our sister company. There are individuals that own different brands in that space and I think that it'd be, you know, our vision is that you could go to one of those, to a fitness row and those could be owned by a specific franchise owner and maybe that's
in rowing and then one's in hiit. But then as we move forward into our aspirations for extraordinary brands is to get into the wellness space and provide that inclusive experience for the member that they might go do their workout but recovery is right next to it or stretching concepts next to it so it's convenient to that member. And ideally it'd be owned by the same individual. So gotcha. You know, for when you
take a look at, take a step back. Sometimes, sometimes people come and pitch and say, hey, I'm going to get to 500 franchisees and you know, X number of years. The way you articulate your, your mission and your strategy is I'm going to award people when it's right for me to award a franchise. I'm not actually looking at a number or a goal. I'm looking at building out relationships and those relationships are going to be profitable relationships.
So how do you think internally? And I know you've got private capital, so it's not necessarily like a venture capital firm or private equity firm that has like a certain Runway and they're trying to get a certain amount of locations to get to the next level. How do you think about. How do you manage and measure success? I guess is the, is the. Boil down the question. Well, franchise development is key to any
franchise system. Right? You know, you need to be growing that franchise system. That's not only with new Candidates, sometimes that's also with resales. You know, individuals that came in from, for, you know, their 10 year term and wanted to move on to something else or retire wherever it might be, we should be involved in helping them achieve their goals that can bring in new livelihood. My approach to looking at franchisees, you definitely need to set a goal to decide where you want to
be regarding awarding franchises. How you get there might be a little bit different than what you thought on January 1, right? Individuals come into your pipeline from many different angles. And you know, sometimes, you know, you set the goal of awarding say 25 franchises in this, in, in, in a year. They come, they might be singles, they might be someone that needs two French,
two studios, could be a three or four. So I think it's, to me it's, it's definitely setting a goal, but it's really making sure that you're talking to the right type of franchise candidate and having your pipeline full with those types of people coming in that are going to have that type of conversation. And I think that is really
a way that you market the actual brands to bring those people into it. If we're really going after someone which we do not like, a master franchise licensing license, that's one way to market the business versus looking from an organic space where we're looking to find someone that's going to be involved and passionate about that business.
In a lot of franchisors that we've worked with in the past, the first set of franchisees are usually either members or instructors that have moved to a new city and said, hey, I got to bring this with me. Do you find, and maybe it's too early to say or to have an opinion on, is it sometimes better to have people that are coming in here and say, look, I'm looking at this as a business opportunity, I'm
not necessarily affiliated with the brand. Or do you like to have people that have some DNA attached to it and are kind of using that enthusiasm to put themselves into business? Passion for the business you're in is important. To be honest with you, I think that there are a mix of individuals that are looking from an investment side of things, but they typically, in my years in the fitness space, they might be the investor grade, but there's something that's drawing them
to the fitness space, right? Either they're passionate about their fitness and their workout regimen. If they knew someone in the business, something, there's something that draws them in, but they might be just a different type of individual. I think that Doing it correctly. And the people I spoke to and speak to often, it's just that they, they want to be able to part of something and they want to be part of something that helps people. Right. And I think
that's like. That still gives me tingles in my neck to think about what we can do to support our franchisees and members. I had a conversation in PVolve, I think it was our 100th member early on celebration and there was a woman there that just told me how important this method was to her living life. Right. And her knees felt better, her hips felt better. And those types of stories are just so unique to this space. I was in the service industry before
and no one said that about their grass, I could tell you that. But they talk about how their life journey has taken them there. And yes, there are members that do come forward and want to put themselves into an ownership position for sure. And I find that those are sometimes the best owners because they understand the modality. Great. Their story goes right across finetley that first time client comes in they can pitch that story and they understand what this modality can do for
them. You know, one thing that sticks out to me on the brands that you have right now is versus some of the players in the space, you have a relatively lower build out cost than some of the groups that, you know, whether it's like a soul cycle or Barry's boot Camp, you know, that are, you know, some of these are in the multimillion dollar build outs and I'm not sure what the return on investment on
some of those are. So when you take a look at how you guys architect this and maybe talk a little bit about what you get besides just the brand and the operational support, not that that's, you know, minimized, but it's maximized. However, here's some of the things that maybe an entrepreneur might not be thinking about where you're like, look, I kind
of nailed this for you don't have to worry about it. Well, I think the build out cost is probably one of the biggest things that you need to be watching as a franchisor. It's everything when it comes to someone's coming to the business if they have an SBA loan or whatever it might be, because we can minimize the SBA and we spent a considerable amount of time on value engineering the studios to take the cost
out. Obviously everyone has experienced a lot of inflation over the last few years and construction hasn't necessarily come back to the ground. There was three, four years ago from Cost. So you have to think about things on how you're building it out. We had a bathroom in just one instance where there were four walls were tiled. It looked great to have the four walls tiled, but the reality is it was an extra three, $4,000 in
tiling that we needed in the bathroom. So instead of doing all four walls, we did it on the wet wall. Right. Can we save some cost there? Is the member experience still good? Yeah, absolutely it is. And so you need to keep those costs down. And I think with from an extraordinary brand side of things, you know, we have build out costs, you know, that are, you know, range, but they're all reasonable. Right. The unit economics will work for it. You don't need to have a thousand
members to make these concepts work. And that's really what Boutique Fitness is finding three to 400 members that come religiously to your studio that want to invest their time getting to know the modality, the members, the coaches, all those things. And our investment level allows for that to actually happen. And then two questions.
One is, do you have a corporate studio for each one of the brands and are the founders still involved in each one of these brands or are they still, you know, consultants or if you want to share that just for future deals, are you looking to partner with them under your umbrella or is it, you know, they maybe have run the course and are for a graceful succession plan? We have both. To be honest with you, it's not the deciding factor for us in regards to if they have company owned or not. If they
do have a company owned studio. I do think it's interesting to use that as an incubator of thought to test things out for the franchise system. If there's not a company owned franchise, you can partner with franchisees that are leaning forward and want to try new things. The businesses have to evolve, right? And to evolve the business, you have to do testing. In one of our row house locations, we're testing out a nutrition, not nutrition supplement, but nutrition
counseling. Now after good research, enough research, we decided that that was going to be something that we felt like it was successful, it could be scaled, but we do have to test it out in the real world right now. Right? We have to make sure it is something that our members are looking for. And so I think going back to the original question about having ownership stay around Neighborhood Bar, the founder is still part of Neighborhood Bar. Katie Richardson, she's phenomenal
and she spent the last 12 years building that business. And why would it be silly not to keep her on our team to help learn and take those experiences and share them with Anita Frog. A row house and a pure bellow, which she has a tremendous background in those types of things. This is Pete Moore. Here's the last tip for you of the podcast. We are partnered up with a company called
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hey, let's get people happy, healthy and sweaty. And the recovery should be just as good as the workout. You know, I was at a couple of tech summits recently and I kind of came up with this quote that says you can't have artificial intelligence until you
have intelligence. So, so what do you do to kind of tell these franchisees and maybe in the background of, you know, whatever software you guys are running to say, hey, we actually got to fill this up with like real information and then I can help you kind of sort it and use it. So I see you smirking, so I'm assuming you're on the same page as I am with that terminology. It's still a people business, right? You know, there's automations that can come in to help support
you and speed to lead those types of things. But even you know, the reality is that you still have to be in touch with those individuals. I look at a quick short story is that if you call me after I submitted a lead, I'm not picking up the phone. However, my wife, if you call her, she's picking up every one of those calls. If you email me, I'm responding to you. So there's no replacement for those different types of engagement with a potential member.
AI is going to be part of our lives, I think for the best. But at the same time, it does not replace the need for a personal touch to reach those people out and understanding they're truly understanding their goals of what they're trying to achieve in other fitness regime. Yeah. And I actually do have one last question on Ozempic and some of these other weight loss drugs. I've been in this industry 25 years and everyone always said back in the day,
oh, it's going to be a pill where no one needs to work out. Now it's actually, you can take this pill, but you must work out or else you're going to be an assistant living at 35 and lose all your muscle mass. With that coupled with hsa, FSA reimbursements, are you seeing a wave yet of, you know, new people entering the space or maybe programming that's designed for like, hey, you're doing this, but you really need to do this also? Well, all those those types of medications do is they're a tool.
They still, you still need to be a healthy, have a healthy lifestyle. Right. You still have to eat correctly and you still need to have a fitness regime of some sort that you're. You're maintaining. So if anything, it helps someone that maybe wouldn't be able to get into a studio because, you know, their shape or size at the. But it allows for them to get into a space where they can go ahead and be part of a fitness studio or feel more comfortable at a fitness studio, boutique fitness.
But I think it's like anything, it needs to be used for the right reasons. I know we're Americans and we like to take a pill for everything, but there's no replacement for a healthy lifestyle. Right. And I think that using those types of medications as a tool works and it helps people get to where they need to be. Is there a need? We do offer FSA and we work with Optum and Ash and we do have members that utilize that programming to help
offset some of the costs that they have with the studio. So I definitely think it needs to be not only talked about at the local level with our studios, but also working with those partners in that space that they make sure that people in the healthcare space, they do tell the benefits of what could be used if they chose to. And that comes from those insurance companies making that a little bit more vocal, a little bit more noticeable that they have those benefits already into their
insurance. Great. Well, thanks for coming on the show here. We really appreciate it. I love what you're building. It seems like you're doing it very methodically and at the right pace. And I'm awarding franchises instead of selling franchises. These are the kind of buzzwords that I hope proliferate through the industry. So someone's going to listen to this podcast and start to use the word award and not hey, I sold. When you sell something, it's almost, you know,
determine the history of the word. Sell is like to sell somebody down the river or to, you know, take get one over on them. I like looking at the derivation of words. So look forward to getting to know you, sending you some opportunities and, you know, seeing you at the shows and also, you know, visiting your locations as I'm traveling around. So congrats on what you built so far. It seems like a great work in progress to to get you on the
show now. Well, thank you very much for the invitation. Appreciated the conversation and definitely want to see you at a show and share an adult beverage maybe. You got it. That's fine with me. Okay, sounds good. All right. Enjoy the, enjoy the cold weather pending and make sure everyone gets in the studio. Great to meet you, Sa. Sa.