Welcome to the Mentor. I'm Mark Boris Michael Ramasy. Welcome to the Mentor. Mate, thanks for having me to see again.
Good to see you this time you come down from Byron?
Where did you come off from Melbourne? Byron?
This time coming down from Byron? Not a bad place to be this time year.
Correct.
Yeah, I haven't been up there. Well, I've only don't like I was going. I did go up there, but like unfortunately got a call away for work and then I had to sort of only study for a day or two days sort of thing.
No dramas. I'll get back up there.
Okay, you are the co founder or one of the co founders of strong Plarates. It's just always some about pilaratees. I sort of know what it is. It's you know, I was first introduced in Australia like maybe twenty years ago, twenty five years ago, pilarts as a concept, but it's been around for how long time? Give me a little bit of the history of pilats. What was the deal with his dude to set it up, etcetera. There's a bit of a story around it.
Isn't that. Yeah, it's and it's gone through so many iterations and it's time. But Joseph Pallati's created pilartis Joe, Yeah, yeah, decades and decades ago. It's been around for a long time, and it's it's you know, it started very much core strength, and they kind of think it's really progressed over the last few years. It's gone I would say, went mainstream probably in the last say fifteen fifteen years, ten fifteen years, where the reformer has really developed and kind of gone
into the commercial fitness space. And interestingly, it's now the most popular genre globally in the fitness industry since twenty twenty three for bookings.
So and I'm sort of not surprised, and we'll talk about it a little bit a bit further on, but like in terms of you mentioned the reformer, which is a machine you can do pilarts on the ground without any equipment or maybe a ball or you know, like a band or something like that. There's lots of different ways of doing pilates, and I think what I think, as I understand, it's actually sort of about core, core strength.
Core strength, mobility, stability, pelvic floor all those kind of things that are you know, incredibly good for your body. But I'd say a lot of people ignore them. Yeah, day to day, and that's really that's where people see the most benefit.
Yeah, and then the reformer that's a machine. Now, so is that part of what he'd come up with or.
Was that his thing or yeah, he has different different contraptions and things like that. But the reformers really developed. And you've got Matt pilates and you know that's basically no equipment. You can get accessory equipment and stuff, but yeah, so the reformers come to fruition and being commercialized. It's very much like spring loaded tension. So as you would lift a dumbbell, you would push against the spring. Ye. Big thing with pilates is sort of that time under
tension holding the posers, activating all those little muscles. So yeah, it's it's it's resistance training, but in this sort of kind of safe flow impact format.
Yeah that's yeah, because I know a lot of footy players or really players who do plarties as part of their rehab if they've got an injury. And I actually, funnily enough, I actually tried it once when I was rehabbing myself, not from football, from something else, and I didn't use a reform or anything that had one of those.
Sort of like a weird contraption.
It looks like there's a black bed and then there's some still rails to go above it, and there's a few cave and let that hanging down.
And the lady was fantastic.
She was she was the wife of and I guess I'm not going to replug you because it's this show about your business, but of one of our coaches, one of us is in coaches in the clab and and she got me to do some stuff, and like, man, I was like shocked at about at how hard it was. Like, you know, I always consider myself fairly strong guy, like I'm just twenty years ago when I did it, fairly strong relative to my weight, et cetera, and pretty mobile. But some of the stuff she got me to do,
they look like really simple, weird stuff. And my legs started shaken. I started thinking, what the hell. It's like, you're right, you're under sort of you do things really slowly and really controlled. There's not much explosiveness in it. It's more really test out small muscles and all stability.
Yeah, it's that's exactly right, and it's I guess, and this is sort of why we've created Strong and we're a little bit different. It's fantastic and it changes your body. I've got hundreds of stories I can talk about you. Yeah, I do Strong probably three or four times a week. Actually, I'll tell you a real quick story. So NAT five AFL player Brownlow medalists, very famous sort of n WA plays for the Freemantle docause he was one of our
ambassadors and he was telling me your story. He was walking along, he was walking across the road and a clinical Plarties teacher saw him walking actually went up to him and said, you need to do pilarates. Your movement patterns aren't correct. Got him into Polarties that year, and that year he won the Brownlow medals. So you're seeing a lot more athletes do it. You're seeing all those amazing benefits of your body. But I guess, and this
is a problem that we've tried to solve. If you're going to pay for a membership, let's say in the boutique fitness industry, seventy dollars a week, you probably want a little bit more than just polarts so you get all those awesome benefits of parties. But you want to be lifting heavy, you want to be in ea singly muscle mass, and you want to be looking after your heart, so you want to do an element of cardio and you want to earn calories as well, because you know
most people want to drop pody fat. So that was a problem that we tried to solve. We took the reformer, which again incredible for you. We've added a roller or a bike.
To the reformer to the reformer, so as a separate machine or all in one paytent two, I see you change the reformer correct.
And this is why I sort of don't go into too much of the classical polates space because because it's really not my thing. I fell in love with pilarates when I broke my ankle and and did plays for rehab and loved it and it got me back to where I needed to be, but I always felt there was something missing. I need something more. I need to sweat, I need to feel better, and you know, as a as a as a human, I want to lift weights as well, and I want to be stronger. And so
I found this machine in the US. We didn't actually create the machine. We found it a friend of mine showed it to me on social media and it was one studio out of Orange County with this row former machine and row former reformer with a rower pending peyton when this thing's like, this is this is what I've been looking for. And at the time, we just exited F forty five myself, my business partner Mark, we owned six F forty five's. We had the number one studio globally.
We got out and we're like, what are we doing? And then we found, you know, we found this machine.
I jumped on a plane, Mark jumped on a plane and we went over and tried this this row former machine, and it was the most excruciatingly beautiful workout from an endorphin perspective, from a challenging sort of mental challenge perspective of going from the rower to being completely gassed to then holding these these moves with time under tension and your heart rates staying elevated the whole time, which means you're burning a whole lot, a whole lot more calories
than you would in normal reformer. And I was like, I need to do something with this, like I need to I need to bring this to Australia and we ended up negotiating the rights for the machine globally and we built a franchise model around the machine. And then yeah, today we've got eighty odd locations, two hundred on the way. We're in eleven countries now, where we'll be in fourteen by the end of the year. We've got eighty studios sold in the US and that's probably a big part
of our expansion. Now biggest fitness market in the world. And it you know, it's working. It's all those things that I thought, Yeah, this is what it could be. It's working now in this incredible membership model that's sort of giving clients everything.
So just in terms of go to market, when you decided to go to market, or maybe just let's just peel back a little bit. So you both did your time at forty five, So what do you learn there? Not great outcomes happened after at forty five, but I mean in the beginning it was okay. So what did you learn and take to your new business? What did you take too? Strong from their forty five?
You had six? Do you have six? Franchise? You said, we had six. We had the number one grossing studio in the world in Australia in the world. But this was in Port Melbourne, right, Yeah, And I always say it's and there's a lot of there's a lot of great founders that have come out of forty five in the fitness space, and I always say it's the best apprenticeship. You learn the good and the bad. You know you're
going to go through some of the bad. Yeah, certainly, and this is probably a reason that you took to your business to make your business better. Yeah, yeah, I mean it's it's certainly a reason that I exited. And I'm still close with a lot of their forty five founders and people, and I'm happy to talk candidly about it. But the oversaturation of studios, like were the number one studio, but we had another one sort of one point nine case down the road. So that for us is something
we're trying to avoid. So that's something that we learned. Too much supply is not always good, So slow sustainable growth is the way. Otherwise you'll have casualties. It's too many, they are cannibalizing each other, things like that.
So in other words, distance between postcodes correct or number of postcodes per franchise yep, So like just on that. What is what's your models? You you have five postcodes? What are you doing? What do you do?
Or is by a number of people? Yeah, population, we try and anywhere from thirty to seventy thousand people.
So a franchise is likely to get somewhere between thirty two.
Seventy seventy thousand populations if that means.
Three postcodes or five postcodes or one post code. That's so it's the population that determines the number of postcodes, as opposed to oh, you know you're you're in Bondai and I'm going to give another one to the guy in Bronti.
Yep, I mean that would actually work, but it's because Bondai is such a mech But yeah, it's it's a very thought thought thought about an ad hoc process. So you pre map, you can pre map Australia with franchise territories, but when it comes to signing a franchise agreement, it's all about how do we carve this up to make it sustainable? How And we've literally been taking territories off the map to ensure that there's space between all all
our different territories. So, yeah, you don't want to oversall because as.
A franchise or which is what you do, you you actually have a map, you and your co founder and I guess these days stuff, but you actually map the joint so you know, you start to carve it up. You say, well this is call it, let's call it Sydney, this is Sydney and the Greater Sydney and these you know, we might have one hundred in Sydney and does that then when you do Brisbane and you do everywhere else and stuff overseas and understand your biggest one is even is Singapore.
I think at this stage when you're bigger franchises, our highest performing highfording franchise the six sixty of the seventy eight or nine we have today in Australia. Right, So.
When you sort of set that out that and you've got your map and you look at what you've currently got, that informs you as to your growth prospects. So when you sort of also work trying to work out how we're going to grow this business, where we're going to grow because that comes to where we're going to grow the business, where I'm going to invest my time and effort in my digital marketing. You know, my taking calls and where am I going to do interviews, et cetera.
It starts with the map, doesn't it with the franchise.
It does, and the map that you get there. There's probably three four decent businesses that will map everything for you. The sort of data driven but it's where you land is very, very different. So for instance, in America, you know, there's and we work with Cape, KPMG, a few other sort of companies, CBRE and found that we could get seven one hundred and fifty Tier one. It's in America, and what do you consider TI one? TI one is based off things like household income, competition in there.
So you build an algorithm around them. Yeah, Michael, so because that's really important. So I just want to sort of dive into that a little bit. So it's not just me to going, well, that looks like a good area because there's seventy five thousand people there. You actually build. You prioritize areas because you can't open them all up at the same time, it's not possible. So you prioritize
based on an algorithm that's weights different things. So you put more weight on, for example, their income, maybe you put more weight on.
They're families there. Perhaps I don't know density even the fitness market in that area. Competition analysis, Yeah, and probably the more saturated the area is the bigger the opportunity. So saturated in terms of what gyms, but the more competition you've got, correct is that because the more saturated is that informs your people's propensity to want to train.
Do you think that's the reason or is it people move to an area because they know it's lots of gyms there.
Well supplying demands. So if there's a huge demand for gyms, more gyms all open in that area. So we know that that community is an active community. Byron Bay has eleven thousand residents, but is in our top five locations in Australia really in terms of revenue owning. Yeah. So, and that's because the Byron Bay population are highly highly engaged. Now for a lot of franchises, they want to go into areas with no competition. They want to find the
be first to market. For us, given how unique how our product is and our service offering is, we like to go into a saturated market because we feel we have a very very unique solution to plates. And two even you strength and conditioning, training, all that sort of thing. So we like the competition.
That that's really interesting. So I like the planning more all that you have In terms of growth, I mean growth. Everyone goes, oh growth, you know, how do I power up my growth? Well, it's about planning and it's about mapping. You must map where you can grow. It's easy to say I want to grow, like where are we're going to grow? Probably this? And I do want to come
back to your planning side of things. And I think what you just said about the algorithm, as I said, an algorithm, but like you know, it's just a formula that your you guys are built, that you own. But I do want to come back to the point you just made a moment ago. In terms of you can plan, you can say the population is great, this, the demand and supply is you know where we want it to be? You know, in terms of socioeconomics, in terms of demo demographics.
You might tell me a bit later, but it could be you know, skew. You might be more skewed to females over forty, or you might be more skewed to males over forty.
I don't know. You can tell me in the moment.
But so to say, let's say all the stats are right, but at the end of the day, it comes down your product. If I could just go back to the product for a second. The product is this, let's call it remodulated reform a machine. I can't remember what you called it.
You called it row former and bike former? Is it actually row former? Is that them? There's such a thing. It's a proof paydent in the US, still pending in ours, but it's it's a row former. It's it's a trademarked word. And we have the bike form as well, so you pick if you ride or wrote for the day.
Okay, I haven't met someone he's strong, so can I just although we did use one of your strong Well, we held a function up in Byron and it was like a how to do a pitch and I did it with another guy and we did together. We did it my farm and we actually send everyone down to the Byron.
Strong party. Yeah, and they loved it. They loved it. We booked it out I think for a day or an hour to or whatever it is. They loved it.
But I never argin o myself, so I know the reform machine looks like it's you know, it's like a it's got a box, it's got pulleys, two handles, single handles. It's got a long sort of runner that your seat moves up and down. It's parallel to the floor. It's been very high up off the floor's you know, maybe half a meter or a third of a meter up off the floor.
What does what does the row form have done?
Have you put like a rower handle where the two individual handles are?
Is that what's happened? It's like if you visualize, so you're right, you've got a carriage, a platform, a platform, a carriage. We've created a second carriage. It's a smaller one that moves, and that is actually the row seat right you need. So it's four point three meters in lengths are quite long. And then on the end is a rower which has bolted in right, and so the second carriage doubles is a row seat. So you can
fluidly move between rowing and players, rolling and parties. And again, like as I said before, like it helps keep that heart rate elevated, and we don't roll a lot like you might row for maximum five minutes. You're coming back to reformer doing you know, spring loaded tension and holding a plane kunder resistance, but that calorie burn is so much more substantial because you've been rowing. So yeah, it's just sort of one big fluid machine. And then similarly for the bike.
So as a bike version of this, yes, so you can get on the biking, spin the pedals, spin the worlds, and then get back onto the reformers so to speak. Yeah, so was the bike version in existence or did you guys come up with that idea?
No, we've started. And big thing I think with any business is like our innovation button is always on. I mean, how many brands do you see now that haven't innovated are the same as twenty years ago? Yep, so that's forty five. Well, franchising is it's interesting mine, Like think about McDonald's, you know, mcafe and healthy Options and now the tech component we can already you know, all these
things need to happen. So for us, like it started with the row former and then we built the tech screen. So similar to forty five, you've got screens there, but the instructor clicks through pictures of the exercise of like an avatar doing exercise, so instantly when we brought that in. That brought in more men who were probably a little bit reformers. For chicks, well that's the conception, right, But we've built our male audience over twenty percent now and
started at like to sub ten. So yeah, we did that. Then we brought in the bike because you can't roll every day. You need diversity in what you're doing. And then actually this week we've just released a reverse spring system which simulates like a forty kilo dead lift press Paul, because we've really leaning into the science of well, if people need to build muscle, they need to lift heavier.
We need to work on progressive overload, so we need to stop, rest, start again, whereas polarates flows is generally I'm just going to keep moving for an hour. Yeah, and you're in your aerobic energine system, which is very tough to build muscle. So long story short, that innovation cycle will never finish. I'm now a lot of our innovation is tech focused, and that's what I'm building out at the moment. But yeah, every year at conference where we met, I deliver one major innovation to a network.
So innovation comes down to product attraction, attractiveness, not just for the franchise, but French Z, but also for the consumer, the customer or the clientele of the franchise Z. And I think let's just talk about innovation for a second. Do you innovate based on what you survey from your customer base? Or do you innovate based on what you and maybe your own little team decide is the latest
and greatest overseas and what drives innovation direction. Because of me, you can send around and innovate about a million things and maybe only one works. It's a bit like a spray technique, you know, they just one you only ever hit once. How do you because it's got to spend money on all this stuff, how do you efficiently innovate? What's your program?
It's primarily based off customer data and research, and I would say almost all the innovations we've created a date are there to improve customer retention and increase average lifetime value of a customer. So we want them trading with us for ten years, which is working. You know, we had ninety plus percent of our members said they felt stronger, eighty five percent felt like they were more flexible, and then it was really cool stat actually seventy percent said
they felt less discomfort. So what we're doing is working. So's surveying, were surveying with surveying, but it's very much what what is going to keep our consumer around, keep them guessing, keep them motivated, keep them happy, because you can't just deliver the same thing over and over and over and over. It doesn't work people, it gets stale, they move on. It's a very competitive industry, as you know.
So yeah, it's based off customer research, and i'd say a portion of it is actually still a gut feel and sort of myself, my business partner Mark and some of our kind of in our movement team. We've got exercise physiologists, strength and conditioning coach, polarities expert, and we all work together to create programming. We've got a testing team of twenty people that test the programs and workshopping
this kind of stuff. But it's a big process. Like the reverse spring system we just launched has been We've been working on this for like two and a half years so and we're a five year old company, so text a little bit quicker in some regards. But when it's like you're delivering an innovation to the network and it's hardware based. It needs to be so much testing and thought and all that kind of stuff. Yeah, and I'm just before I go to the break. In terms of.
Releasing an innovation, do you have a have you learned that there's a period of in a year, there is some time at a particularly year, like for example, this year twenty twenty five, that is best to release the beginning of the year to keep everybody excited, to make sure they're new and because you know they're starting the year off, they might be feeling pretty shitty because of Christmas just passed. I've got to get back into make size regime and that's my new year is resolution or
whatever the case may be. And I've got to make a choice as to where I'm going to go. And you know, because people have choices, and if there's something new out there, they might because XIS environments can be quite fetish, you know, because one minute we're telling them get in top. We need to do more resistant work, not on me getting to we need to do more arabic work for our heart and lungs. Another time we're
getting we should be swimming, you know. No resistance in other words, have no resistance, no friction, in terms of our body. There's always a new fad coming through, not a fad, but a new experience. So when is the best time do you think in your business to release your renovations.
It's probably more when to avoid in the fitness space. Yeah, we'll not do it really. Yeah, December is the best time? Is the worst time? Yeah? Is that because everybody is distracted? I mean Christmas, Christmas parties. It's just Australia everywhere. That's that's Australia is worse than everywhere else.
I'll post Melbourne Cup day, astray closes down and Australia.
Get anything done. I was was. I worked all through Christmas and I was painful trying to get anything done. But anyway, it's Australia.
Don't do it around December is at the bottom line.
That's right, and and the rest of the world follows to a smaller extent. But the best time is generally we find February is probably the best. Now we've gone a little bit earlier because we've started drip feeding marketing of our new system, and we're trying to when everyone else is still asleep at the wheel. We're trying to really get people, get exactly. So we started this marketing pretty much second of Jan and we just launched what twenty third of Jan, so or sorry, twentieth of Jan.
So it's yeah, it's really interesting how it works. America's on from first of Jan. It's mad. It's quite crazy. How yeah, how much Overseas differs from Australia. But we're a little bit sleepy early Jan. Yeah, we're blessed. It's bad.
We can do it sort of what we like. Well, I'm going to go the break and to come straight back. I do want to talk to you about the marketing, you know, like timing and marketing. Do you mark around retention periods? Do you have do you know analytically when your biggest risk of retention is? In other words, is there a period of the year when people are I'm over exercise? Is it beginning winter? Because you know, like media organizations have high value periods.
I remember when I was doing.
The TV show that we would always build a show either before the winter started because peop watched much more TV when it got darker, and then you would make sure that that show was over before daylight saving came in because since daylight saving caving, people just stopped watching television and then definitely didn't do anything in December and you wouldn't pick up.
Again until February.
But you know, ideally the TV was always around April, May June. That's the peak period May June July, you know, when people at home. I'm very curious as to your industry whether or not there's a sort of some sort of pattern, you know, because it's interesting. You know, we talk about analyzing things. I mean, really, what we're trying to do is identify patterns and how can we not be disadvantaged by a pattern? And how can we take
advantage of a pattern? And these are basic business fundamentals and I'll be interested to know about that and how do you market into those patterns once you've established patterns.
But let's go to the brain. Come straight back. So I'm back from the break.
I'm here with a co founder of Strong Plarties, Michael Ramsey, and we've been talking about a whole lot of stuff, and you know, we've established how important innovation is when it comes to recruiting and retaining. You know, you might like just to be known as that person, but at the end of the day, it's about recruiting new customers, recruiting new franchisees to distribute the product, and also helping them retain their customer base. And they're like critical parts
of the business model. And we have also talked about I do want to talk a little bit about why you choose particular territories outside of Australia. You know, we talked about the mapping process, but I want to know why would you go to the US, why would you go to Singapore, et cetera.
And I'll park that for the second.
But the thing I want to talk to you right now about is marketing and marketing. When does when do you get the best bang for your buck? And how do you market.
Historically? And I will just say I'll just talk about Australia just for this. I think it's the easiest way. Historically, I would say November, it's November, is what the best or worst? Best best? And then also like your February March would be on par as well Novembers.
You know, we're talking too franchises A. Michael will be talking to consumer.
B two C. So just consumer. When we see our sort of peaks and revenue, let's say franchise revenue that comes in through the studios, I would say November is certainly the best that we have and then peaks of sort of membership sign up in engagement is sort of late jan through till late March, the guilt period exactly exactly, and I mean it's really important. It's not that like it falls off a cliff in April or August. I mean half of Australia will go to Bali or Europe
as well. So those considerations as school holidays, which also affects utilization in the studios.
But is it low utilization during school holidays.
Yeah, it's generally lower because kids are at home parents parents, you know, or they've got parents taking them away time for all that sort of thing. So for us, like it's not even about capitalizing on those those big periods, it's about having a really consistent marketing calendar and a really great strategy. So we know that like now we're
eighteen months ahead of planning with our calendar. We know that there's these huge uplifts in in in revenue with times like Black Friday sales in November the financial year sales.
So Michael, when you say you talk about people who sign up or people who people who buy packs.
Right, and because Polarates is we're a hybrid model, so where you can either sign up to a direct membership maybe it's seventy seventy five dollars a week unlimited training, or you can buy a five pack, ten pack, twenty pack, five sessions. Yep, right, correct, So it's you know, we know in these sales periods people are purchasing. So around Black Friday, like the studio is sometimes double in revenue because all the consumers are looking for deals. So yes,
you want to capitalize on that. End of financial year is kind of pretty similar as well. It's getting bigger in the fitness industry. But for us, it's like having these consistent periods of are we dropping a new marketing campaign here, are we dropping a new innovation here, We've got this incredible campaign we call it Strong Week where it's all about our members. That's in August, which is generally a low period, and that was strategic so we
can gauge them. We do like custom programming, as so many prizes we give away and there's all these you know, social media prizes and and you know whatever, it's it's it's pretty it's pretty intense week, but we always do so well out of it. So it's just about I think mapping out that twelve month.
Do you try to smooth it or the smooth are you in terms of your marketing campaign periods? Is that about smoothing revenues or is it about just taking or is it about I don't care, I'm just going to take advantage of the big spike.
I mean for us, it's all about it's always about growing, and it's not always revenue we have. We did have a year on year we always increase and we increase twenty percent average revenue last year. But yeah, it's it's sometimes we're looking at metrics like how do we get people training more and how do we how do we get members staying longer at the main Longer you mean so not not terminating their membership.
After a five pack five pack or a year or six months, whatever the case may be.
Yeah, if there are I think our average customer stays it strong for about fourteen months. It sounds pretty long. That is longer. Industry average I think is much lower. But how do we increase that? And what marketing campaign or maybe it's a programming sort of iteration that we do to keep them. Maybe it's you know, some sort of you know, we're doing a twenty one day habits challenge and it's all built into you know, their app where they close the ring, similar to like an Apple
Watch and all that kind of thing. So it's it's more about you know, looking at the overall picture and saying, Okay, these are good revenue months, how do we how do we keep keep people longer? And then looking at those peak periods and saying, all right, well let's capitalize here. Let's capitalize here.
But do you have a preferred platform, like is it TikTok or is.
It mister what we were talking about? You know, yeah, it's it's Facebook. It's certainly Instagram Facebook Facebook Still, well call it Meta, I mean Meta owns Facebook Instagram. Look, most of the most of the return on investment is through Instagram marketing.
Is that because you haven't really got into the TikTok yet or is it or you try it just doesn't work.
There were limitations in Australia with TikTok advertising this you can probably do more or you could do more in America. I think it's coming back. So for our US launch. It's a lot more TikTok focused Australia. Still, Yeah, not that big a drive or necessity. But I would say, you know, majority of our leads come from digital marketing through Instagram and Facebook. And how much do you rely on micro influencers?
I mean do you plug it into that sort of category?
Yeah, influencers is a really interesting one.
Can we just break it up between influencers and micro influencers and specific influencers and other words sports training influences micro influencers.
I feel other way to go highly localized, highly targeted.
Right, so micro let's define that though. Micro influencers might be a person who's a bond die, person who is known to go to try it all the gyms and recons strong Blood is the best?
Is that what we're talking about. Yeah, Similarly, it's not so much the Jim junkie. We like the local heroes. So you know the owner of the coffee shop, he might have five thousand followers.
Yeah.
The hairdressers are great, they talk all day. Yeah, so they're the micros that we like.
You do you knock on their door or has the work or do you go through a third party who hooks you up.
We generally knock on their door, so all the franchise e does and when they're on boarded through our induction process, it taught all these things before launch. Try and get you ten local heroes involved.
So so, Michael, I'm sorry to keep you revenue, but is it when you when you're inducting your franchise into well, just keep amusing by.
It's close by.
But when you're when you're inducting your Bondai franchise, your team says to him, look, here's here's a way of getting influences. You actually induct them in in a like an education process. These are the sort of people we need to talk to. For example, with your local headresser and barber and this do you also go to this saying and this is the conversation you have with them. You're going to get your haircut or you go and get your beard shaved, and you say, you know, would you be interested?
And do you pay them? The micro influencers, it's generally for someone with a with a smallish following. It's more a free membership or a free tempe tempas three contradeal and it's it's more about building and communities like probably the number one success factor for for a boutique fitness. It's about building that community. And you can't be too sales or or trying to press someone to do something
they don't want to do. But yeah, it's all about how it's approached, working together, Like you can't just be here coming in and flaw my business and needs to be some reciprocal stuff. I even like to go pay for a session at all. You know, the franchises around you, you need to pay and look after each other. I think with small business, I think it is super important. But yeah, it's for a lot of franchisees who generally open in their hometown where they live. They're already the
local hero. You know, they've got everyone there. We've got a We've just brought on a tech like a software subscription where you can analyze the area. You can get all the data of the influencers that live there, where their following is, which is also very very important as well. And we can actually give our franchiseesy a list of twenty. But ideally the best way this happens and I'll use the Bay and Bay case st again. You know, it's all about getting in your community and that those girls
in Byron have been in their community. They own a pt studio, they know every single person. It was just for them. It was very organic. So yeah, it's it's the challenge of I guess enfranchising. You have the franch you have a franchise model where you can have sort of the mum and dad operator, or you can have the investor model where and in the US we've had one guy by forty seven locations on his own, and the investor model is less connected to the community. So
it's about how do we solve that problem there? Yeah, really interesting.
Stevie ol has got one in Cooji or his wife has partner. He's got one in Couljie next door to his recovery outlet, which recovery being one of those pleaching I get a in friends Horner, you get in the cole bath. You know, they've got of lots of other sort of contraptions that help you recover and be better. But he's put a strong pilarities right next door. I think he's got another one to it's he got one
or two. He's looking in Bondai BONDEI okay, so he's got that one and that sort of like feeds feeds the recovery business because people will come over and maybe you feel a bit sore or you know, I just want to continue on their health program.
That's quite clever.
He would be a good example of a because you know, he's the ramp, was the ram with rugby union coach. So he's a good example of an influencer in an area. I mean, does that Is that the sort of thing you like to see?
Yeah, and we love to see that. And it didn't take long for that studio to just take off, take off. I mean I was just literally before before this, we had a performance meeting and I was looking at the amount of new trials going through the door and could you and they're doing such a good job new trials being members that we've got a trial off of four sessions for forty It gets people in refer a mate, Yeah,
all that sort of stuff. You know, you like to run promotions a couple of times a year, not all the time because it kind of it's not good for your brand to always be on discount. But yeah, so they're doing really really well.
That's an example of a let's call it a local influencer exactly. You know, play for Australia coach Ramwick. It's a pretty prochal area everybody. And Ranwick Rugby Club is just down the bottom of couldi oval there, it's just near the oval, so like, and it would be known in the local Area's a local kid.
He grew up.
He went to school of Waverleys. As a recall, he played footed one of my son's.
So yeah, like I get I get that.
That makes sense to me, A lot of sense to me if I could just move across, if you don't mind, I like to just look at Singapore for a moment. I'm intrigued with Singapore. See if it's a funny place, you know, like maybe I was going out there for work about ten years ago. He used to go there every month. At that point you couldn't even get a
decent coffee. But it was a very Starbucky type style, you know, that's the But then they started a morph into sort of coffee getting here, like a high quality coffee, like a proper coffee, not a Starbucks style coffee. And I haven't been there much lately, but it seems to be adopting a lot of stuff that Australia does, but a lot of money everyone's got two in the family. Both work usually stable jobs, good income places at rich joint. You know, it's just it's a wealthy place. I actually
love Singapore. I don't not necessarily, I wouldn't want to live there, but it's great tax haven. But I love the place because of if I look at the system there, the way they've sort of built that country with like a pretty much an autocracy, and how they've sort of small it's got no resources, yet it's very wealthy. It's amazing. Why did you guys decide to happen up with Singapool?
It's certainly the most engaged fitness community in Asia really by a mile. In otherwise, what do you mean by that?
People love love their fitness, love their fitness. What about health generally? Like is it a health joint? Like people thinking about it. I'm going to have this shake, I'm going to have that food, I'm going to have that protein. Is that something you've passively Really it's full?
Yeah, it's really. Yeah. It's it's become a real mecha in the fitness and wellness space as big on tech as well, huge tech, huge on tech. But all the big franchise brands like anytime fitness, and I think at forty five had at one point had a lot of
studios at BFT. They're all doing, you know, exceptionally well really and I think I don't know what the stat is, but for instance, we just launched in Japan and only four percent of the population have a gym membership in Japan, so we had to and there's some of the challenges of launching overseas in different markets. You know, we had to alter the programming to be more entry level, which is totally fine. There's lots of long term opportunity there.
Australia there's thirty two percent of the population with a gym membership, which is actually I think quite high, but there's still a lot of room to grow as a as a country. Have a Singapore there, I don't know, and that's sort of where I was getting at. I would I would assume based off their population it's probably much higher than that. So for whatever reason, there's.
Only a small population, there's only like I don't know, it's only seven miles long, and I don't know, something like four miles wise isn't really big because I think it's like eight million people in here.
Yeah, I think it's something like that as well. But it must, it might. They must just be very highly engaged communities of people that love fitness culture. There's so much to do.
I mean, it's a greatespeak simple. I mean, it's not like you can go down a bonder for a serf. You can't go to the mountains and you know, in the middle of winter and experienced snow, we'll go down the snow. You can't fly to Melbourne or Brisbane or Gold Coast or Daintrey Forest, Singapore, Singapore.
There's nowhere to go. Like you're in the joint. You're in the joint. There's nothing that way or nothing that way. They've got a.
Little down at Sinosa. They've got a little bit of a sort of a semi type thing going on. But it's not a you know, a greatest respect. It's not that much to do, so training would be a big part. Work is a big deal. Everyone works there six days or six and five and a half days at least a week, they worked long hours. Maybe it's the sweet spot is exercise and looking good and feeling good and taking it to the next level. I'm not surprised it's done well. I'm just curious as to why you guys chose it.
We went and did a conference about two years ago, and there was a group that owned I think ten yoga studios over there that were doing very very well, and Singaporean group. Singaporean group. Ozzie guy married Singaporean that he now lives there, right, and he ended up purchasing ten studios with a development schedule over three and a half years or something. So it wasn't so much us
identifying Singapore. We knew it was a good market, we'd heard, we'd looked at data things like that, but it was more finding the right partner, and then when we found the right partner, we gave him exclusivity or them a master franchise sort of thing similar, but they own every studio. They're not franchising, right right. Master franchises are good in
some circumstances and not in others. I would say you need a population of at least thirty to fifty million in a country to master franchise, right, Yeah, Because so.
This individual owns all studios, all of the.
Studios, that's right, They've got all ten. And what's the mode look like? Michael?
So you you tam miss say, look, mate, Singapore jaws at fifty what would you take a percentage of revenue?
How's it was like a royalty? Yeah, we take eight percent of revenue and a two marketing levy.
So yeah, so you see your and so that means and then therefore your responsibility is to spend your money marketing his business in Singapore, for example, And there's a greed schedule, I guess. I mean, we come up with a great schedule and then whatever his take is, he pays your percentage of that.
That's that's cool. And have you done? Is it the same model in the United States? Same identical model around the world. We have mastered in Japan, Korea and Canada, big populations. Yeah ye, but yeah, same model all around the world. It's you know, enfranchising is tough, Like it's the biggest question I get asked. When I have friends that own one, two, three studios. You know, they're going, well,
they're like, should I franchise? And nine times out of ten I say no, because if unless you're prepared and you have a product or a service offering that can probably open one hundred studios, don't franchise, open your own or you can do and this is something we're looking at now. For the US. You can do like a section of say corporate owned, where HQ owns x amount of studios, it can franchise x amount just to grow the brand and get the brand equity. I guess bills
in other countries and other areas. But it's a really interesting one because I think a lot of people assume that franchising is easy to pull the trigger.
It is tough, tough work, and it's continuous, it doesn't stop. Yeah, it's not one transaction. It's a series of transactions with lots of twists and turns on the way through. Is it expensive? So some people think, oh, I'll do a franchise because in terms of building out my distribution of the product, there's a lot of capital requirements. So if I get someone else to do the take, go on
the franchise. They can spend their capital and they can run, you can have their overheads, and I don't have to worry about that sort of stuff.
I mean, that makes sense. Doesn't mean it's going to work, but that makes sense.
Is your business or your franchise or opening an outlet, is it capital intensive?
Yeah, it's anywhere from four to five hundred k. It's opened up a studio.
Is that is that fit out or is it mostly machines and stuff? That's everything, But where where would most of the money be dropped?
Probably thirty percent would be equipment, the rest would be fit out. And then also marketing pre sale is super important. You need to spend early on I think last year our average was two hundred and fifty eight members before opening, which means, let's say you break even is one hundred to one hundred and fifty members. You're profitable from day one. So yeah, it's sort of around i'd say around that five hundred k mark now. But it's all about getting
the business model right. So seventy percent of our franchisees own two or more studios, so they're all making money. We've never closed the studio in five years. You need to get the business model right so your overheads can't be too crazy expensive. You want to get a return on investment, you know, we try and get EBITDA at least around sort of twenty five thirty percent revenue of revenue.
So I'd say it's less about the capital and more about the ROI right, I mean, you can you can get you know, machines, finance fit, that's finance, all that sort of thing. But I think it's it's all about building a really sustainable business model. And you know, the clients need to be comfortable with the price, the franchise that you need to make money, and the franchise all needs to expand and build brand. It all needs to
work in an ecosystem. And there's so many intricacies. But yeah, it's as I was saying before, it's I think it's a lot more complex than people think. But Jesus, we've.
Learned someone who's been running franchise business for thirty years. Man, I know how freaking arted this view. But it is complex.
But I really like your model.
Do you guys, do you does head office franchise or do you sell the equipment to the franchise e or is it third party?
Yes, so the person that we met in the US that created the machine, he's now our equipment supplier. So it's third party. It still goes through us because it just saves a lot of headaches and things like delivery of equipment on time, ready for launch or ready.
For their logistics. Yeah, and and and in terms of the logistics, well, in terms of maybe everything. So when if I go and to sign up to a strong parties in couldji, does that mean does the does my sign up money?
Do you manage all that for me?
There's a franchise or for oil mean do you is that you collect all my money and then send him his money take your share? Or does it all the money go direct to him and he pays you your share?
It goes direct to him, then he pays us, he pays you. Okay, Now there's there's there's franchise systems out there that do it the other way around. Yeah.
Man, my business, I like to collect money and to the payment, but which means it always a month behind because I have to collect all the money. Then because I'm collecting from banks, I have to collecting the money. We're collecting three hundred million, so that's a fevit of money to collect, you know, and we've got to make sure it gets to everybody at the end of every month.
We're paying at twenty million a month. But like it's I would like to do it that way because I don't want to be sitting there waiting for someone to pay me. And I've been able to manage to get them to wait for me to pay them because and that's the model in my industry. By the ways, there's no one else any different. But so, so you're not actually doing administration for them, you're not really running their back office. You're doing the marketing, but we're helping the marketing.
Yeah, we're giving them systems and everything is something is what we've set up in software, our own portal. We've developed everything's there for them and we teach them how to use it. Yeah, but they need to run there, but you're not running it for them.
So because some models, because I'm involved in another business called m will used to be called whimp to Warrior. We had to change it because we're going to get canceled. Is now called train Altar, which we listened on the Nastak where we actually provide all the back office to MMA gyms. We had eight thousand gyms around around the world.
And because we do all the marketing, we do all their payments, we receive the payments, we pay them mainly because MMA gym guys, I'm pretty hopeless at it, you know, and they do a market they're very good teachers. They love MMA, but they're not very good at anything else. So it sounds like to me though, that your franchisees all budding entrepreneurs and business owners, proper business owners, not necessarily specialists. They may also be a specialist in which
huge guys do strong plarateies. But it starts off they're probably a business owner, want to be a business owner, run their own business.
Is that a fair assumption, I'd say most of them are. Yeah, yeah, And it's we're a lot more selective now in who we allow to buy into the brand. We're at the start speak to markets very very important. So at the start it was a little more scatter gun, take what you get and you learn, you learn. As I said, we still haven't closed the studio. Our average revenue, as I said, increases last last year by twenty percent, so things things are heading in the right direction. But the
selection process is now very much. You know, there's a prerequisite. They need capital as well. A lot of people want to buy strong but don't have the money.
Yeah, they're buying because they want to make capital. You've got to have capitals kick it off exactly. It's a bit hungry, yeah, I mean day one it's a bit hungry. I mean, you've got to got to have their backing. Yep, you can't walk in there sort of broke or.
An asset that you can you know you can you can get lending from. Yeah, but yeah, it's it's it's nice to be in the position now where we've got the reputation, we've got the data, we've got the runs on the board, and we don't need to bring in absolutely everyone who applies. Most of the growth is coming internally. So there's franchisees now.
With getting another four studio. Yeah, I've got a friend who's got a couple out of the West. Her name is Adriana because she's got a few.
Out that west. She's doing well west.
Yeah, but she was an early adopter. She went in the years ago like maybe Weather or Park COVID period early COVID perhaps, and a goer, you know, pretty tough, tough at what she does and from all the council doing quite well. So if I could just put two questions onto you now, Michael, just a little slightly different time, given that you've been around this game. You're only young, but you've been around this game for a fair while.
It probably feels like a lifetime to you. What would you tell your younger self today, if you were kicking this business off now, don't do this or do that.
It could be a bit of both. Great question. I would say, back yourself and go harder and believe in what you're doing. Go harder, go harder, don't be sort of shit like it's it's amazing, Like we are the
black sheep of the players industry. So we cop a lot of slack for putting TVs up and running strength components through the reformer and using the purist not at all like we're running our franchise marketing right now is love traditional polarties do not invest in strong like it's a little bit of a catch like we're just trying to, you know, be a little bit disruptive and not not
not traditional franchise marketing. But it would be go harder, back yourself, believe in what you're doing, and not think that you know there's limitations or or there's risks, because yeah, I I just I know it feels like we're in a really good growth phase, and in truth, we are. But there are a lot of times in those early days when the criticisms coming in and you know, there's a lot of traditionalists, saying Joseph Plarties would roll over
in his grave if you saw this. Fu Yeah, And personally, I wish I'd just not really taken that on board and just stayed the path.
Yeah.
Every single time we've created an innovation or an edgy marketing campaign or just really dived into what the consumer actually wants and followed the science, it's come off to be brilliant. Every time we've grown, we've Yeah, consumers are getting the results, We're opening more franchises, and I just wish I had that mindset early on. I'm a little more a little more confident in the way I go about things now, but it's taken sort of four or five years to get here.
So and well done and fine. The final question for you is always take a view in business. As a business owner, I always know what your exit is day one. I mean, he might not exit, he might stay there forever. But what's what do you think about that? I mean, what's Michael's position. I mean, you're a young guy, but you don't want to be doing this when you're seventy.
What do you think?
Do you ever think about that stuff? We're just going to I'm just going to go for it at the moment.
Yeah, I mean it's it's always in the back of my mind. And it's not like we don't have pe knocking on the door every week, or private equity, private equity family officers like whatever always knocking on the door saying give us a peace, will help you expand all that sort of Yeah, and we'll help control you. Right now, we myself and Mark own one hundred percent of the business were self funded. And the more we can do this and the longer we can we can hold on,
the better the result at the end. What's the breaking point? Is it?
Okay, So that's a good point as long as you can hold on and that I think that's a function of how ambitious you are.
So if you're.
Cash flow enables you to open on twenty a month, but ideally like to have forty a month because you might be getting worried.
I've got to get out there and get it.
Take the real estate straight away, get as much real estate as possible, which is the forty five model, and then do something after that. Okay, if you're not that ambitious, but you're ambitious enough just to take what you can afford to open, then I don't think you need your money.
No, and you don't, they will try to get you to do it. They will seduce you. It's so I'm getting really used to the questions and the conversations. I like to still have a chat with them. Yeah, and it's so interesting. They're always like, hey, you being no pressure, you know, no pressure, It's all good. I just want to help you all that kind of thing. But yeah, look, it's it's like we're doing very well from a brand perspective,
from a consumer perspective. If we had to answer to a board that was telling us you need to open twenty studios a month, you need to do this, you need to do that, I think we would lose touch of the brand and I probably wouldn't enjoy it as much either. No way, no. So for us, we're going to get to where we want to get to and it's not going to take that long. Franchising is great because it is high cash flow. You've got residual income
coming from franchisees. You've got new territories that you sell which are fifty k pop. The money comes in. Were asleep. Yeah, I wouldn't say that much, but it's still it's still it.
Is annuity business. Like it's sort of like anuity business. You're getting paid weekly, a month or whatever the cycle is. It sort of isn't anuity business. There's not one transaction where they pay you a franchise fee, which probably just you we just break it even on the franchise fee, but the annuity just keeps rolling. And assuming they're an operator,
they can then run the business. And assuming got the right product in the right marketing, which seems like you have at the moment, there's still a good innuity business and that'll help fund either an ambitious level of growth, maybe not an overly ambitious level of growth, which we need lots of capital. But the trade off I'm getting lots of capital from it pe is that you sort of lose control a bit because.
They usually buy themselves.
And I'm not bagging mobs because they're great, but you know, we've had them on the show.
Et cetera.
But it doesn't sound like you need one because they usually buy themselves. A veto right by the way, so when they're come in, they might only have thirty forty percent, but they say we've got the right to say no, which is the effective really we've got the right to tell you what to do in a different sort of way, and I think people should only go to them if they need to grow really fast for some reason.
I completely agree with you. It's we don't need them. And even the even the reporting requirements once you're a place in that game is it's a distraction. As long as we're putting money back into the brand. Like we talked about the marketing fund, we spend sometimes two times what we get in, Like, we're putting it back into the product, back into the marketing. As long as the consumers are enjoying it, the franchises are happy and making money,
we're good. And we've got a great pipeline of studios coming up. You know, I think the two hundred on the way at least now. We don't want a thousand studios, you know, that just to me seems crazy. So it's it's very much long story shot. I would say, it's like step by step, you know, And there might be something down the road where maybe we do a raise to really fast track you know, Strong's expansion in the US.
Maybe we look at something like that. But yeah, while things are good, we're going to keep keep the path. It's interesting.
Just remind me of something in two thousand and four when General Electric bought the Wizard business of me and I stayed on as a chairman, and I remember the marketing department. The marketing department of Wizard had like thirty staff and the accounting department of Wiz it had like six seven And within were two months that was flipped.
The accounting department became thirty because they had to report up to people in America, and like the level of reporting, like this metric and that metric and et cetera, just got out of control. And you know, the marketing state of thirty, but like accounting and the extra cost, it became a because you know those people are accountants or whatever.
See if I the type people, they're all getting paid one hundred and fifty, two undred and fifty and all they just just churning on reports that every month, based on this, based on that, and it doesn't doesn't increase your P and L, it doesn't increase your revenue, doesn't make the franchisees any happy, it doesn't make the customers any happy. It does nothing for customers. I'm not bagging in these big organizations, but they are typical. They're not
a private equy group, but they are a typical investor. Like, we need to know the numbers. And by the way, it's not just you want, Tom, these are the numbers we want. These are the metrics we want. Things you've never even thought about. Made them feel comfortable, make them feel happy. But it's an expensive exercise.
Well, they need to answer to there, to their investors as well. They've got, they got, they've got.
They have a like a suite of pro former processes which they give to the investors and applies to every investment. So they're not going to say, I don't worry, Michael, you know you've goum pretty good.
We're happy.
Just give us a number every six months. What would be happy with? They said, no, No, this is our rhythm and we need this every month because we need this every month for all from for from all our investments, because our investees, our people, invest our fund they want to see it.
And you're right, So you have to try and.
Avoid that whilst you're in this entrepreneurial phase and some stage you get maybe saturated or sort of saturated. Probably not in Japan and Korea and America, says so big markets. But here you probably get some stage which point maybe that's the time to think about these sort of things.
But you know, investments you probably need to leave. Like any any good exit, you need to leave some meat on the bone as well, so to speak, a little bit less and saturated.
Yeah, it's side, but I might explain something about it to the audience, because what's interesting about you just said is that when you come to do the valuation at an exit, let's say in Australia, and let's say you know your map says Australia to take five hundred franchises instead of waiting to five hundred franchises yourself.
The reason why you might do it at three.
Fifty, for argument's sake, is because when they do the valuation of the business, they will do a forward profit.
So look at what is the it for next year.
The profit net for next year will be based on not only what you're currently doing, but based on growth of new franchisees and growth of customers within the franchisees. So all of a sudden you can give them a much better forward looking number. The multiple will also change. So you take that profit and then you multiply that by multiple modiple, and that multiple if you are saturated,
then that multiple might be five or six times. But if you've got lots of growth potential based on the number of extra franchises you put in, that multiple can go from five times to fifteen.
Times twenty five enfranchising there and it can.
Be such a much, much bigger increase in valuation. You may never get there, but that's sort of one of the reasons why that's an important point you make, which is why I wanted to explain a little bit more.
To the audience.
Franchising recurring income upfront new upfronts, they will have multiples apply to them and you leave a little bit more in the tank, and generally speaking you get away with a bit more, depending on the marketplace at the time, depending on the economy, et cetera.
But good point.
We shouldn't the pea companies, by the way, it's stupid they get all this stuff, but you know, it depends on how desperate they would to invest their money.
It's a very different It's not twenty twenty one anymore, is it either, Like where money's cheap, well now, but look mate, it'll come back.
It always does, because what will happen is you know, inst rats will start going down. Investors won't be getting six percent in the bank anymore. The beginning three percent. Investors going to say shame shit, like we better start putting some money back with the pe firms. The p firms get a whole you know, get a whole raise a whole.
Lot of money.
They can't leave the money sitting there in the bankers they're only getting three percent too. They've got it is going to say, we're going to find someone invest in. They go along to mature business like yours with a lot of upside, and they say, mate, you know we've been talking you for two years, but we've always been talking about them multiple of six but but now talking at fifteen, like are you interested? And you start quivering.
But and that's a great thing to have to look forward to, because you know, judgments need to be made at the time, and you knows little things like you know, will they rule my brand, and will they affect my franchisees and will they ultimately affect my customers? All those sort of questions you'll go through. That's going to be fun that I love.
This running a process. Yeah, it's yeah, yeah, And.
You'll have to run through your own mind, but look, good luck to you made it.
You're doing a great job.
You're doing it a very very staged and very rational about the whole process.
I love your product.
I'm definitely when I got to Barron next going to go down to the one Barn and have a look at mind him, do a session. I know Jonathan who's join the piece, who's my business partner up there.
He loves it and.
As an Aussie business, Aussie brand, good luck you ma, it's great to see we're exporting against Americans.
It's nice to represent Australia in the US. It's it's really it's pretty cool going over as your brand.
I love it totally, totally. Normally it is coming the other way now it's going back that way.
Good luck to you, Thanks mate, I appreciate it.
H