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Adam Zeitsiff: Gold's Gym growing through bankruptcy - Blog.

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Adam Zeitsiff: Gold's Gym growing through bankruptcy

Meet the man at Gold's Gym making the tough choices to grow stronger.

On this episode of the Escape Your Limits podcast president and CEO of Gold's Gym, Adam Zeitsiff, gives a sincere and open account of what's behind the brand that recently filed for chapter 11 bankruptcy.

Having closed multiple locations for good as part of the restructure, and with some of the first gyms to reopen in locations after coronavirus closures, Gold's is now at the forefront of how we get out of the coronavirus climate and grow stronger on the other side.

The Escape Your Limits podcast is brought to you by Escape Fitness – a global community of gym design and gym equipment specialists that are looking beyond exercise alone to escape mental, physical and professional limits.

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Adam Zeitsiff on the Escape Your Limits podcast.

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Who is Adam Zeitsiff?

In his role as President and CEO of Gold’s Gym International, Adam Zeitsiff maintains operating responsibility for the iconic, global industry-leader in health and fitness, including overseeing franchise growth and operations, along with the brand’s portfolio of 130 corporately owned gyms with a team of 6000 employees.

Gold's Gym is an iconic brand of fitness. With both company owned and franchise gyms, the brand has been active in 29 countries for over 55 years.

From its beginning as a small gym in Venice, California, Gold’s Gym has grown into a global icon with more than 700 locations serving three million people across six continents each day.

Adam Zeitsiff episode highlights.

  • How COVID-19 can dramatically alter growth plans and lead a business to restructure dramatically in order to survive.
  • What challenges pre-coronavirus had taken effect with Gold's Gym that had caused the brand to look to its future plans, and how the pandemic accelerated its response.
  • What effects low cost fitness spaces had on Gold's Gym, and what pricing adjustments the business made to compete with that sector of the market.
  • Which Gold's Gym around the world was the first to open after the coronavirus, and what they've been able to teach other franchises in other countries about how to implement safety methods and give confidence back to members.
  • How important it is to look after your team and partners during a pandemic, no matter how many employees you have to put on furlough.
  • What common factors there are across states and internationally, and how you can implement these trends in your fitness locations for maximum member benefit.
  • What changes you can make to your gym of fitness studio in equipment, machine placement, staff codes of conduct, and the training on conversations your trainers and employees should be having with members.
  • Why the pandemic has accelerated the use of digital and physical fitness initiatives for a hybrid offering that's here to stay.
  • What lessons you can learn from years of app development to combine digital user experience with bricks and mortar fitness.
  • How important home fitness is going to be after the coronavirus, but why it's not going to replace gym memberships but complement them.
  • Why fitness is its own preventative medicine in order to help members in every aspect of their lives rather than just for aesthetics.
  • How long it will take Gold's Gym to recover from the current climate and what the brand's future plans are to grow and diversify.

 

For more insights from fitness industry thought leaders and entrepreneurs, check out the blog homepage.

Discover more about Escape Fitness.

Full episode transcript.

Matthew Januszek 00:28
Welcome to this week's escape your limits podcast. And if you're in the fitness business, and I think you'll find this episode extremely valuable as we talk to someone that's had to permanently close 30 locations. They're also one of the first operators to reopen their facilities and go through all of the different requirements in order to get their businesses back up and running. They not only own corporate clubs, but they also have franchises all around the world. And we also talk about how They have created this hybrid fitness model so that they have a membership both inside the fitness facility. And at home. I think you're really find this episode extremely valuable. It's with Mr. Adam Zeitsiff, the CEO and president of Gold's Gym International. Adam Zeitsiff. Thank you so much for joining us today on the escape podcast. I know you've got you've probably got a lot going on in your in your world at the moment. But I just want to ask you, you know, from a personal perspective, how How's it going?

Adam Zeitsiff 01:35
Yeah, well, first of all, thanks for having me. I certainly appreciate it, Matthew. And it's been so exciting to be here. And it's been a it's like with everybody in the industry. It's been a challenging 6075 days, at least domestically, longer around the rest of the world, right, but it's, uh, we're getting on Well, we're making the best of it. We got a lot of things going on in our world. But for me, it's about making sure my team members are happy and healthy and their families are healthy and we're all coming Sticking, sticking through it together to try to get through this, but one day at a time.

Matthew Januszek 02:05
Yeah. And from a personal perspective, you know, what was it? Was it like at home with? I assume you're at home at the moment, are you

Adam Zeitsiff 02:13
actually this is my first week back in our global Support Center. So there's only a small handful of us here, but I'm back. But yeah, I spend about eight weeks at home with my wife and my two older kids, my younger kids and eight month old baby is one of them. And so it's been quite interesting. I enjoyed it tremendously. I do miss them when I'm here. I think my wife is appreciating a little bit of her extra space right now. But I also think by around four o'clock she's ready for me to come home. So

Matthew Januszek 02:41
so so tell us a bit about what's happened like I've we've I'm sure a lot of people have read the news about the what, what's happening with with Gold's Gym and I just saw it'd be interesting for you to kind of explain a little bit about that story. I know there's Different parts of of your business so you know if if it's okay with you, you know what, what was the lead up to that like and you know what, what what was the decision that you guys had to make and why?

Adam Zeitsiff 03:13
Yeah so when I came back here in February of 19 You know, my mission My plan was to turn us into once again the best franchise or a full service full amenity fitness around the world. And as you know, we're in 29 countries and growing and we've been doing this for 55 years but in the domestically in the US we had a little over 100 hundred and 10 company own Gold's gyms. And for us we were working hard since the moment I came back to work on a reef franchising effort to refresh size those those gyms and award those to people who lived and breathed in those local communities who understood their backyard and could really focus on those businesses and and really grow them and we had a we had a really a goal of re franchising 50 or 60 clubs and keeping about 60 or so. for ourselves, supporting our franchisees, which we do well around the world and continuing to really accelerate the growth of our business through franchising, so we got about halfway to that point, we read franchise clubs in the DC, Virginia, Maryland area, Tennessee, a couple in LA to our amazing franchise partners there. And we're well on our way to do that we will have a great operating model in our company on gyms that we had just reworked. We were ahead of all of our forecast going into 2020, the first, the first 10 weeks. And then of course, we all know what happened in mid March, our lives changed forever. And so at that point, after about a month of realizing we were shut down, and seeing really how detrimental COVID-19 was not just to our business, but to retail and restaurant and fitness and everybody and looking at those approximately 30 or so company owned gyms that we had, that we really wanted to continue to re franchise at that point, you know, in order to protect really the future of this brand, and to take swift action Make sure that we can be here for 55 years or longer, we had to make the decision to restructure the business through that chapter 11 process, shut down those 30 or so gyms that were still part of our plans every franchise, and really make sure we could come out of this thing and emerge even stronger and cleaner, with a strong balance sheet with a great portfolio of 60 or so company owned gyms, and a really strong franchise network that is still struggling right now to recover from this as we reopen, and they will recover with their own support and our support, and then really grow the business from a franchising perspective. So that's why we made that decision. We made it proactively, we have a responsibility to our global franchisees and our global community around the world. And that's my job to make sure that we're here and we're going to be supporting them for the long term.

Matthew Januszek 05:48
So with the clubs that you close down then so I have you, you coming out totally on the on the corporately owned facilities now going forward.

Adam Zeitsiff 05:58
So we'll know we'll still have about 60 days Those when we emerge out of this in fact, you know, as we record this, we have opened our clubs in Oklahoma City, the company own gyms. This in a couple more days. On Monday, we reopened the ones in Texas, which is between ourselves our company on gyms is, I think it's 4647. And then of course, our franchisees in Texas and you know, the week afterwards we'll have our Carolina gyms open with just California remaining from a company perspective. So we are excited to keep those 60 or so clubs and I'm going to try to regrow them and build and protect those markets. But I think that you know, we won't be out there we won't be double that again, we're not going to be in that hundred plus company on gym range anymore. That's just not where we want to be.

Matthew Januszek 06:43
What were you starting to see you mentioned that you plan to franchise some of those locations but with with the COVID situation had that just put more pressure on some of those locations that that you were with with tough previous You know, that just accelerated the process that you were thinking about previously,

Adam Zeitsiff 07:04
it accelerated the process, but it also it made it so that even though those those gems could potentially possibly recover, it would have been much harder to have them recover and much harder for a franchisee to come in there and, and make a viable business out of them long term, the last thing you want to do as a franchisor set someone up for failure and that's just not what we want to do. And we've had to manage that, you know, the cashflow, drain and the and the potential liabilities that could have been very detrimental to our business and that's why we chose to proactively restructure through that filing and and get ahead of it and get get this hopefully be emerged from that filing before even Unfortunately, many gyms around the country might still not be open. Right? And that's our plan so we can be in and out of it and ready to really accelerate out of the gates.

Matthew Januszek 07:45
So prior to the COVID, I guess, you know, sort of forcing this situation on you guys. And you mentioned that you were you know you were looking to sort of franchise a bunch from anyway but what would you say is that you know, where there are other trends changes that you had seen as a CEO kind of emerging in terms of you know, consumer behavior changes or, or certain rent increases or whatever that just made, you know, your old business model more difficult to sort of have going forward.

Adam Zeitsiff 08:17
Yeah, I mean, I think some of the things pre Cova that we saw, certainly, you know, we were landlords have had a lot more leverage, you know, 6075 days ago so that was still something even though there's plenty of space out there the big box space of course, and we've seen lots of companies we have franchisee so we're taking advantage of some of the available big boxes, right to get great deals for their gyms, especially in California, for example, but, you know, we certainly saw those ones with a little bit more leverage. We saw the consumer really looking for early days, that kind of hybrid solution, we were seeing more uptake in our gyms of our for example, Gold's and our digital fitness app and our solution that we have, and we can talk a little bit i'm sure about what that looks like right now. But we did see Are consumer looking to be with? Are they working out a little bit at home 60 days ago or a lot more in the gym, they were looking for more of a converged solution, and like that kind of full service offering. And so I think we saw some of those things happening and a lot of that stuff certainly accelerated over the last couple of months.

Matthew Januszek 09:17
And how would they heard this that the low price models affected you guys that that, did that? cause you to have to, you know, sort of move in response to that. And you know, we're a lot of those type of customers previously come into a gold's gym for example.

Adam Zeitsiff 09:37
Yeah, so what we again speaking just for our company own gyms, I mean we made some adjustments to our pricing, and we are certainly you know, not trying to change our model and is hvlp hvlp. Two, they'll probably be a three and all these things. We are not focused on that as much as making sure we can offer our members the best full service you know, mid market gym experience, they can For that 30 to $40 price range, right and so, at our company own gyms for a long time, we were our, our entry level price was was a $40 membership. And we made some adjustments over the last couple of months pre COVID and kind of put that entry level price everyone that $30 2995 range. And we saw a tremendous uptick from that. I mean uptick. I mean, yes, increase in volume for a mid market full service kind of gym like the Gold's Gym, but we also saw a significant amount of people not be afraid to commit, right and people are, you know, you hear all about no contracts and just pay small amount per month. But, you know, we had over you know, give or take 80% of our new members over the last couple of months pre COVID that we're committing to a year no problem because they felt it was a good price point. They felt comfortable that $30 a month they were getting full service gym, that group exercise classes, the kids club, all the other amenities that we offer here and options for others. They feel comfortable with that. So for us, it's any operator, it's a fine line between what what can you charge with how long you get them to commit to be there, and how well you engage them. And we were really focused on retention and engagement. We had deployed a whole new retention program. And that's why also we felt people were pretty excited and comfortable signing up for the long term because they saw we were engaging we were attaining. And we saw our NPS scores go through the roof over the first four months of this program, again, pre COVID. And it all tied to their their happiness in the club, how we were supporting them. And so I think, you know, price point hvlp market certainly has a market for itself and it's growing like crazy, but I think we focus on the folks who are looking for more that full service club affordable, and who's known for a long time for getting you results, whatever results means in your fitness journey.

Matthew Januszek 11:48
I guess Gold's is a brand that that I certainly remember when I came into fitness 30 odd years ago, it was always, I think, at the T shirt and it just seems to be one of the original g brands, and I guess you're probably, you know, one of the first brands to have the, you know, the the gyms that you own directly and then also to probably franchises is my guess. So what sort of changes have you seen in that model as a company where you where you're operating both? Is that as that changed over the years and more recently, hence your decision to kind of focus more on the franchises or is it just more specifically related to your business where you know, it makes more sense to to be growing via franchise as opposed to corporate? Oh,

Adam Zeitsiff 12:38
yeah, I mean, listen, I think I think any franchise or in any industry needs to have their petri dish it needs to have a group of company owned restaurants, retail stores, fitness gyms, where they can experiment where they can deploy new products where they can drink their own Kool Aid right and and have that base and, you know, even some of the largest quick serve restaurant chains with thousands of locations. have at least 30 or 40 of their own company own so they can make sure they have that environment. So they can talk the talk and walk the walk. And so I think that's very important. I think we realized over the last, you know, a couple of years really where the value in our businesses and what we can offer and we've always been known as the trusted fitness authority. And that doesn't mean we have to operate our own gyms to be known as that. In fact, that's why franchising works so well because you get your local operators who become the experts and the local trusted fitness authority is Gold's Gym, and we support them really well. And I think we saw the value of that and realize that as much as we over the last decade started to whether it was acquire or build new gyms and that's always important. I think we've learned quickly that we can operate that that group of 50 or 60 clubs, have our petri dish really take what's valuable and how other people grow and live out their dreams and grow the brand that way.

Matthew Januszek 13:53
So, so you know, bringing us to where we are today. What what are you seeing now? On the, I guess on both the corporate owned side and the franchise side in terms of, of planning to navigate this situation because I guess there's you know, you're probably one of the few companies that have such a global footprint. You know, what what do you what are you seeing happening? I guess you know, initially with you with your own corporate clubs and against state by state, I'm sure that's different. And then some at some of your franchise partners. Yeah. What was the assessment of where we are today?

Adam Zeitsiff 14:33
Yeah, so I mean, the I want to give credit, the first gold gym around the world to reopen after the after being shut down was Gold's Gym, Mongolia. They did a great job in one location, but they work with the government. They built the standards for gyms with the government. They got the government to approve those standards and they reopened after some training with those safety standards about so about three weeks ago, and they're doing well and they're getting back to, you know, some traffic and people coming In, so they did a great job. And then we just kind of took some learnings from them. We took learnings from lots of other gyms in the Asia Pacific market, just like all my colleagues out there have done. And we then really started to apply those learnings to our franchise network in our community and looked at the local and state guidelines right to see what they're doing for real openings and made sure we were at or above those guidelines. And so to your point, yeah, we've got some gyms outside of the US reopening and they're starting to continue. And we like to say the sun never sets on gold's gym is thankfully there's now gyms around the world open again. But in the US, you know, we're opening in Georgia, and our franchisees, they're doing a great job. Same in Tennessee, Wyoming, and as I mentioned, Oklahoma City and we just been looking at what this temporary new norm is, right? Yes, we've got to do all the things that you hear about people doing in these clubs, social distancing, or physical distancing, the equipment and the treadmills in spacing and floor spacers and masks and gloves and Temperature checks if the government needs it and all those things. And so we're really focused now on making sure that each of our franchisees in each state or in each country are finding out what the local municipalities and guidelines are. And the rules are marrying it to some of the best practices, we help deliver to them to make sure they've got at least the bare minimum required, we want them to go above and beyond. Because I think it's important for members to feel comfortable, not just safe, but feel comfortable in the gym, because they'll continue to come back during a crisis like this. So that's what we're doing. And we're gearing up and it's also the team members to I'm sure you've been talking to lots of folks and their team members need to feel comfortable, they need to know that we are taking care of them. We've got the guidelines and the PBE in place, and that we're making sure we take this seriously. And we're not rushing to get open on the day we are allowed to if we're not ready, we're making sure we're ready first that everyone's trained. And so I think it's important not to forget the team members, but that's that's kind of what we've been doing and how we've been handling it so far. And as you said, we're still in the early days, we're seeing more countries get the okay and more states and just like a lot of my colleagues around the world We're just keeping a very close eye on.

Matthew Januszek 17:02
And how is that? How is that being managed from a brand perspective thing? Because I suppose each country's slightly different. Are you as a brand, sort of setting some of those guidelines that that apply generally across the board? Or are you having to manage that on a market by market basis and sort of almost allowing the countries to advise what what they what they should be doing?

Adam Zeitsiff 17:25
Yeah, we've got a French support team around the world for our international franchisees or domestic ones. So they're working closely with all their customers. The franchisees are the master franchisees, they're pulling down the reports from the governments on the local guidelines, they're matching them to what we've done already giving them suggestions on where they can do better and how they can improve and how they can manage their team members expectations and the members expectation. So you know, we, our team, you know, we were fortunate like everyone, we had to furlough a lot of people during this crisis, but we kept our skeleton crew with the global Support Center. We kept our global franchise team intact because it's free. Important during times of crisis like this to step up and support your partners and support your franchisees around the world, and so they're heavily involved every day and helping them and giving them guidelines and sharing. In fact, I just got off a webinar that we just did for our entire domestic base, all about reopening our franchisees that are open, they shared their best practices, as did we because we have clubs open. And we had hundreds of people on that webinar from our franchise community around this country, just listening and learning and participating.

Matthew Januszek 18:28
Are you finding any commonalities that almost like standards across all countries, like you mentioned, social distancing, but are there any sort of things that you can say will let you know pretty much all markets that we operate in? These are things that are going to shape what the you know in your business is likely to look out from there free weights that are cardio to the strength and you know, managing the sort of guests as they come in and out the business? Is there any things that just you know what you think you're going to be common across everywhere?

Adam Zeitsiff 19:00
Yeah, you know, although some states are on one end of the spectrum where they're like, okay, open up, do your best and some states are literally very rigid and everything in between. But I think what we're seeing definitely the consistent pieces is, you know, shutting down cardio or spacing it out. So you got to leave six feet in between both next to each other and alternating across moving strength equipment, definitely physically distancing that I think the PP for the staff at a bare minimum, we're seeing very consistent, at least, the maximum the gloves are also consistent. We're definitely seeing capacity guidelines right now. Here in the great state of Texas, we're going to open up at 25% capacity. I think, in similar I think Georgia was very similar for a while some states open at 50% and some open with none but there's some sort of capacity, at least in most states. So we're seeing that piece of it. And we are seeing them limiting things like most states are limiting things like full on locker room use other than the toilets, right? And some of the things like kids club phase one is that's pretty consistent where Hey, let's hold off on that. Let's Make sure we get this right, get everyone comfortable and safe and then move that to phase two.

Matthew Januszek 20:05
How are you like cardio and strength seems to be very easy to manage, you know, in terms of controlling what people do and preventing them from sort of breaking those guidelines, but how are you finding it in areas like free weights area, which are generally always the busy one of the busier areas in the facility where there's not the ability to kind of manage how people go in and out of dumbbells or their functional training areas where you got a lot of people moving around? Are you keeping those open? Or if you got some ways to control that at all?

Adam Zeitsiff 20:35
Yeah, I mean, it was tough and it was a challenge as we were getting ready for this and once though, yeah, you're right cardio straightforward. What we did is we moved all the benches in the strength theories around and we put with a floor clings that we designed maximum so people could see okay, this benches here by this floor clean. We did that also in the multifunctional areas, with the turf areas or wherever we had people just stretching areas. So we had those four flings around as well. We're also greeting people as we come in and giving them a quick insight their first time back in the gym, so they can kind of understand what these things mean. We even had our members in our company on games, we created a new code of conduct amendment, where they're gonna stay signed digitally before they come in or when they walk in, they can scan the QR code and just to agree to that code of conduct and to make sure they abide by it. So we are some of those areas are a little bit difficult. But we also have people walking around the floor, they're walking around, they've got the little spray bottle on their hip, and they got the paper towels and they're walking around cleaning and chatting and talking to people and and we've had to train them. We've had to train them on conversations we'd never thought they'd have to have like, Hey Matthew, good to see you looking good after a couple months by the way, you're standing too close there. those are those are things we got to be careful of and we've been trying to teach them so they're they're walking around and helping and I think members members get it. You know, I was in Oklahoma City gyms last week or opening day meeting talking to members myself hanging out and they all they got it mask on working out cleanup After myself, stay apart do my best and they think it was been drilled into them everywhere else.

Matthew Januszek 22:07
Are you getting the members and wearing masks as well?

Adam Zeitsiff 22:10
Yeah, so we're so what we're doing is at Gold's Gym company on stores where clubs were, were adhering to local guidelines. So if they say members must wear them, then they we make sure they are. We coined the phrase that coining the phrase we like to say, bring BYOD bring your own mask, we strongly recommend they'd BYOB to our clubs. And I would say a good portion of our members when I was in the clubs last week had the mask on. So you know, certainly follow the local guidelines, but I think most people feel comfortable. And eventually that'll be up to them what they continue, but our team members are certainly in masks and gloves right now.

Matthew Januszek 22:44
Do you think that they'll be sort of more of a situation where the responsibilities on the client the user to take their own precautions as opposed to that necessarily, you know, being the club's ability to manage if they're too close to each other, like I go into supermarkets for example. And they, they kind of you know, have signs up and say look, you know, keep distance but they're not policing it or anything like that. Would you say the same thing will happen in the gyms? It's like, Look, you know, use some common sense and just don't do anything stupid.

Adam Zeitsiff 23:17
Yeah, I think so I didn't look at anything and you know, you've been in this industry a long time in the fitness industry is the ultimate sense of community, actually in the clubs, right? You build your own community, you look after each other. And I think people will do that they will help. I hate to say self police, but, you know, self patrol and look around and, you know, they see something going on. Usually people are the first to speak up, but I also think they're respectful. You know, thankfully, generally, most people are respectful and understand we're in unprecedented times. And we I know it's might be a little hard to do a bench press with a mask, but if you have a mask and and you're safe and you're feeling good, you'll be back and you'll stay healthy. And so I think I think we will continue to make sure that we are cleaning up after members making sure they're doing it themselves as well. A little bit of both. I think we'll find a happy medium at some point, but it's still it's still pretty early days.

Matthew Januszek 24:03
Yeah, that's right. What are you doing about things like dumbbells and bars? Or I suppose you got people, you know, putting them down picking them up. Are they are you getting them to wipe that that stuff down themselves as

Adam Zeitsiff 24:13
well? Yeah, absolutely. We are asking the wipe down cells, but we also have somebody in the strength area pretty much at all times in our company on Jim. So they're keeping an eye out there helping. And it was great. I did witness a lot of people grab the paper towels or grab the pre, you know, the cleaning wipes that are already there. And they pulled out of the bucket and they were wiping them, the dumbbells down and the barbell and and of course, the benches and things like that. And they were pretty, they were all over it right? Some states like like Texas is actually requiring full full finger gloves when we reopen on Monday. So obviously, we'll still clean up course but they want people to wear gloves and then wipe them down afterwards just to help, you know with that with the sanitization piece,

Matthew Januszek 24:54
and what about like areas where you've got like, I know, group x and a lot of cases are not open, but what would you say? happening in spaces like that? Would it be a case of where you have to bring your own mass? Can you see people bringing their own boxing gloves and yoga mats and that sort of thing to classes more, as opposed to having communion ones?

Adam Zeitsiff 25:12
Yeah, I think that's gonna be on the unfortunate normal for a while. I mean, even though they're not open, we're already looking at the floor claims and starting to install them in our group exercise rooms in our studios and figuring out what that 25 or 50% capacity Max is going to look like and making sure we monitor it correctly. I think we are going to be in that unfortunate normal where if it's a yoga class, it's going to bring your own mat you know, if it's if it's a boxing or kickboxing bring your own gloves, I think we're going to need to do that for a little while and I I kind of think people will I feel they would understand it, you know, as a consumer, they probably feel safer. I got my own yoga mat. I know that I clean it. I know it goes back in my trunk in the car and and off I go.

Matthew Januszek 25:50
I've seen some pictures going around the internet. I think I think they're from Asia, actually where they've got these screens in cardio areas, I suppose in some ways. It allows you to Get more people in there what what are your thoughts on things like that for as an operator,

Adam Zeitsiff 26:04
I mean, I've seen those pictures as well and we in our front desk and we just we got the shipments in for the next round today I saw some pictures we are installing the plexiglass that protects people and has a little hole you can slide through, and the sneeze guard type things and that's about as far as we're going there. I you know, I understand that, you know, those may help protect but I also feel just personally those are also add to the cleaning nightmare. What could be a nightmare, spray them and clean them and they could become carriers themselves. And I just think it's one extra surface that could potentially contain the germ although maybe saving someone in between. But they can also contain germs themselves. It's just the cleaning man those things. It's like cleaning a glass table. Right? Those are you never get them clean. So I think we're not going to go that route. I'd rather shut the cardio machines down making sure we're cleaning and spraying with the medical grade cleaning supplies and just go that route. My opinion.

Matthew Januszek 26:57
I know a lot of models nowadays. As as, as the sort of industry is evolved, you know, there's a very fine line between, you know, your rent costs and your staff costs and your and the number of members that you need inside a facility. And and I guess with the pressure from a lot of the low cost businesses that's probably even more sensitive Now, how do you think, you know, if this continues beyond, you know, a few months, how do you think the business models will need to evolve to, to make that work with, you know, with you 25% or 50% within the facility at one time, do you see maybe prices having to go up to make the models work if you can't get the amount of people used to have in?

Adam Zeitsiff 27:47
Yeah, that's a million dollar question, right? That's gonna be a tough one. we've modeled a couple different ways, and we're still looking at it. We've modeled some pretty dreary assumptions in terms of memory loss and we've tried to you know, that kind of see what that could look if it was a little better and be a little less conservative in that regards. But we, we were pretty conservative and just modeled a lot of member loss and but at the same time, you know, for us, we may have, you know, anywhere from 20 to 30 people working in a gym and we're gonna have, you know, eight right now between housekeeping front desk and managers, right. So are we are dropping our operating expenses accordingly. During this time, we're going to see how that balances out. I think we were pleasantly surprised that our post open attrition in terms of member count loss was nowhere near as high as we thought. But also, billing hadn't started yet. So we'll see how that goes. But I feel cautiously optimistic that we will not have the attrition we thought from a total member count. But it's going to be we're going to be looking at it running the models pretty much weekly seeing what it looks like looking at our operating expenses. And yes, staff operating expenses will be lower to begin with, but cleaning expenses and supplies will be higher, so it probably won't offset but it's still gonna be there. So we're looking at all these things and we're gonna have to play it almost week by weaken and make decisions and be nimble.

Matthew Januszek 29:03
And you mentioned that about the cleaning I guess at some point there's going to be the need maybe for extra bodies than what you know. I guess general businesses are probably had is that is that how you're seeing it that you just need to have more cleaning staff in the clubs were taking when they opened the changing rooms and things?

Adam Zeitsiff 29:21
Yeah, I mean for us so in our company on gold seems against speaking from the air and a lot of our franchisees as well, we do have a housekeeping staff that we had on staff already. So we have that staff there in the clubs all day. But we also are allocating for example, sort of two front desk people will be forward after the first week of things dying down that front desk person is probably gonna be on the floor cleaning following up. You know, we're not opening personal training to start so we've got some one or two that are coming back to help and just be on the floor and monitor. So we will have people who may have been in other jobs in that job right now. And but expense wise look we at our company own gyms we decided every night we're bringing in a third party company. Above and beyond our own housekeeping team who's going to come in, and electrostatic spray and clean the whole gym, with the sprayers that come in every night they spray dries sanitizes we did some tests a couple weeks ago, we were when we were closed, it was fantastic. And so we just we just added that to the p&l that's just there, that extra fixed costs every month, but they're coming every night after clothes and doing that. And so it's an other expense. But I think it's certainly a worthwhile one that we have to manage.

Matthew Januszek 30:27
What was when you open the clubs that you recently have your corporate ones, what what was the what was the sort of feedback from, you know, from your, your member perspective? You know, there's You certainly when when you look at social media at the moment, there seems to be such you know, people's views as almost like polar opposites in extremes, you know, people that are very angry about protesting, you know, leaving the house and then you've got people that are just very angry about coming back. How have you managed that Politics around opening and, you know, doing the right thing for your clients?

Adam Zeitsiff 31:06
Yeah, I mean, it starts first and foremost with our team members, we took some extra time. You know, I hate to say recruit, but you kind of had to recruit, once you got your GM and your managers in the club back. A couple of managers you have, it's really going out there making sure you find your team members who are comfortable, who feel that, you know, they don't, they're not in any risk categories, and they can come back and wear their peepee and be back. And so I think once you get them comfortable, you know, I think members we're seeing, you know, I think it's gonna take a little time in Oklahoma City in the first four or five days, much better than I thought we were at about 60% of our check ins compared to last year, which on any given day, pre COVID, we'd be mortified, but I mean, we actually much better than I thought and much better than we've seen around the country. So I think, I think it's just gonna take time, and what I'm telling people is, look, come on in, don't even wear your workout clothes. You'd come in and put your gloves and a mask on walk around. See what we've done. See how Separated everything, see all the cleaning station, see the staff running around making sure things are good. see other members there, just get yourself your anxiety levels down, which is why we're posting pictures on social and some videos and letting people see that, you know, we're doing everything we can, you know, nothing's guaranteed but everything we can to keep you safe, make you feel comfortable and just come in and see for yourself and if you feel good, and then come back the next time you gear on and have a good workout and we'll do our part if you do your part.

Matthew Januszek 32:27
To say this as as being a little bit of a sort of leveling the playing field again, where you've you've almost got to sort of as individual brands competing for you know, for clients, do you think it's possible that you know, the consumer is going to relook at what they're doing and where they're going and and you know, the brands that are doing some of the stuff like you're talking about and doing a good job of being transparent and he's in the men again, it's gonna be an important Part of where they rejoin if they come back at all.

Adam Zeitsiff 33:04
Yeah, I think so I really do. And I think, you know, just like, during a crisis, how you treat people, whether they're your team members, your members, your customers, you know, I think speaks volumes. And we've done our best. We're not certainly not perfect. We've done our best to weekly communications to our members, sometimes email sometimes videos from me. I know our franchisees were doing the same, they were great about it. Same thing with team members, even the furloughed ones, and staying in touch with them weekly. And I think it does, I think to your point, it does resonate, it maybe levels the playing field a little bit. And I think they will look at how you treated them during the crisis. And then the first few weeks emerging from the crisis. And I think the goal is you build loyalties there and you hopefully keep those members for a long time.

Matthew Januszek 33:45
After being involved in opening some clubs and being ready to open some clubs and you know, sort of all different stages, what what would you say are some of the biggest risks as an operator that you've got to be ready Doubt into Is there anything that sort of stood out more than anything that you've got to get right

Adam Zeitsiff 34:05
here? I think for me, and I've been saying this a lot, the last, you know, a couple of months, interviews and the circuits and stuff, I think, for me what the code pandemic has done has accelerated this hybridization of what you're seeing in the fitness world. And you got those folks like, like the peloton and the echelons in the Nordic tracks of the world who've been out there. And some other apps that have been out there for a while is kind of disruptors. And they're over here, and we're over here as operators, right, and they're disrupting, and they're doing a great job. And some of those are, you know, some people can't afford that option, and some people can, but now I think what you're seeing is that it's going to be completely a hybridization approach. And if you're an operator, I've been saying this a lot if you can't come together, and have a physical fitness solution that has the same voice and persona and messaging as a digital one that's from your people and that gives your members an option to have a workout or two at home during the week with you and your trainers in your brand and your voice, and then a two or three workouts a week in the gym because it helps their schedule and they kind of got used to it. And they want to spend more time with the family on the weekends and not get up in the morning sneak out for the gym and hope they can get back in time. I think that is probably the most critical thing I've seen about this as an operator is we've got a look at that. I don't care if you're just one location, a couple or you know, a couple thousand around the world. It hybridization and the digital and the physical aspect of fitness is here to stay. People will expect it. And I think it will build loyalties and help people achieve their results a lot better, as well.

Matthew Januszek 35:37
It's interesting. You mentioned that I've had a good look at your amp app, and it's very impressive. And from what I've read is you develop that in 2017. So it's been going for some time way before this happens. You know what I suppose what are your thoughts because I guess everybody now if you know the club's closed down and everybody's reaction is right. We're going to get into we're going to create the content, we're going to put it out and you see every you know, everybody now, suppliers and operators that are putting out workouts, I suppose they think, Okay, well, we've got a trainer, they can do workouts let's let's do that. But you know being in that space ourselves, it's a very different business model, just creating content and editing it and getting the lighting and producing and then the music thing which you guys have got a really nice solution in your app. What What's your thoughts about companies that are considering doing that? Maybe as a reactive movement and what I suppose what are some of the lessons that you guys have been learning since going back to 2017, about that digital solution to complement the bricks and mortar?

Adam Zeitsiff 36:42
Yeah, I think the learnings we've had is, you know, a couple things. Number one, I think is it's best to have your people in both right, we've got, as you said, Gold's app, and those are for the most part. trainers. Well, they're all employees of Gold's Gym from minus a couple of guests, people we had come in, but they're mostly You can bump into them in our gyms, whether there are franchisees gyms because we've had guests from franchisees come in our own gyms that we own. Those are our employees, those are our team members, you might do a 30 minute workout with Sally on your, on your running at home and she walks you through because you got no time in the weekend to come in and gold but gold Sam has that workout and you might bump into her training somewhere in your gym, right so I think the first thing is certainly make sure that your people are involved. I know there's tons of great third party content out there I don't mean to knock it in any way it's all top quality, excellent content. But as an operator if you want your brand and you want loyalty to your brand from your members long term, really need to have content that is a from your brain, be from your people and see in your voice like the same way you talk to them in one of your studio classes or, or one of your small group training classes in your gym. And the nomenclature and the things that you use should be the same things you do in the digital right so they just feel I'm part of XYZ gym or Gold's Gym and it's it's exactly what I do. The gym is what I do when I'm not there. And I just do it a little differently, but I feel all the same. And that's been one of the biggest lessons learned that we've had and how to do that, how to speak to them. How do we engage them? And how to make them realize that yes, the gym is the best place to get a great workout and the best selection of equipment, the variety, the classes, the community. But if you can't get in one or two days a week, then you know what, we've got a solution for you that will that will more than make up for it when you're not there. And so I think that's really important for people and and there's lots of live classes, like you said, people going Instagram Live and Facebook Live. And that's great. But those platforms are these more public facing platforms that are still not your voice. And they don't they don't demand loyalty and create loyalty to your members as much as your own solutions, your own app and your own people doing

Matthew Januszek 38:43
hasn't been a big when you started it, I believe, if I'm right, that you're probably the one in your previous role that wrote that. Was that was that correct?

Adam Zeitsiff 38:51
Yes. Yeah. In seventh 2017 correct. Yep.

Matthew Januszek 38:54
Right. Which was, was it you know, I suppose, was there a lot of work involved? In doing that, as a fitness business, you know, was my guess is you've got to set up all of that production. And, you know, I suppose was it was there a big investment required? And did it take a long time to really find the groove in terms of where you should be playing in that space? Because there's also a lot of competition in that world as well. I guess.

Adam Zeitsiff 39:20
There is. Yeah, I mean, for us, it was, you know, I think the the thought behind it was like we understand, and I certainly feel that your your, that we're not going to be the not the Netflix to the blockbuster. I don't think these these apps are certainly going to disrupt us in that regards, right. But we felt that we needed to build loyalty and keep loyalty. So having an app as a brick and mortar brand really helped that. But for us, you know, it was it was about a nine month endeavor, because we really, we really wanted to make sure that this could be something that we could expand across the country. Our franchisees could see benefit in that we could have for them as well. And so For us, that's why it took a little bit of time we licensed the music, we wanted to really make sure we had robust music, to music from today workouts, all the things that we have in there. So yeah, it was it was a significant investment. But it doesn't mean that a, a current operator, one to five locations can't get in there these days, there are third party companies that can help them with the back end with the mobile app. And they can use their own facilities and their own gyms and create some really good content and get up there to help their members.

Matthew Januszek 40:29
Do you have Is it like you actually have a division now within your business that manages that because I say as an outsider, and I recommend anybody checking it out, but you know, particularly how it works with the music. It's pretty, it's pretty impressive, I must say, thank you.

Adam Zeitsiff 40:43
We appreciate it. We've got a home. We've got a business you know, for years we've been an operator of clubs a franchise or in a license or and really our fourth business unit now is digital, right? And we've got some don't want to give them away. But we've got some really large scale plans global plans, we just actually launched a new version of amplify Last week, so when you, you probably if you have it on your phone, you got the upgrade, but we've got some really good things planned with our digital piece. And we really you know, for us it's very important to take it a globally and be really expanded to be the best the absolute best, you know virtual gym membership you can get with the content, the programming and the support, but we've got a it's not a big team, but we've got a small team of people in our companies, you know, it's about seven or eight people whose This is their job every day they focus on this

Matthew Januszek 41:26
focus part of your business. I think that's the key. I think it's not certainly in my experience, it's not something that you can just do and give it to one of the juniors to manage it's

Adam Zeitsiff 41:37
not anymore. Certainly it's certainly very important as this new is forget the pandemic is the new norm moving forward is people expect both, certainly.

Matthew Januszek 41:47
So what what's your view then on on the home fitness market, like you've kind of mentioned about the hybrid model. I know in our business, we've certainly seen a huge spike in people wanting to buy Equipment home and a lot of the home maps and as you say, peloton, you do you think that working out at home is going to now become and work with people probably not commuting and that sort of thing anymore. Do you? Do you think that's now going to become that other place that you that that's gonna be important for people in terms of their exercise habits?

Adam Zeitsiff 42:22
Yeah, I mean, I couldn't I I was looking for a couple extra dumbbells myself when the pandemic hit and I couldn't find them. And we know all the suppliers it was it was a little nuts but, sir, I think I think look, I do feel strongly and I think all my colleagues in the industry do this is not going to replace the brick and mortar gym, the equipment, the selection, the classes, the community, the advice, the trust, it's you know, support from whoever's operating those gyms but I think it will certainly and I hope it does. I really hope it drives more at home fitness. You know, we need more people to get involved in a healthier and active lifestyle and working out. And I think as as Gold's Gym, for example, we know a lot of those people will be in our gym around the world. But we also as have been the one of the really the founders of this industry. We aren't we are a trusted fitness resource around the world that we are banking on that to ensure that we can grow that digital business and with partners like yourselves and a lot of other equipment manufacturers who are delivering product to home to people. And delivering product is one thing as you guys know very well you can make great product and deliver it. It's the expertise, it's the training, it's how to use it, it's the consistency. It's you know, changing up the workouts and having that you know, those coach led workouts even if you are at home, and that's where I think things like a brand like ours and other brands out there can still certainly be very successful and succeed. But I do think home workouts are here to stay. Like we said the peloton a company that wants their net worth as of this morning Who knows? I lost track of all those zeros but they're growing like crazy, but you know that great product, great company super cool content. Really. It's a certain demographic of people though, and I think there's so many more people out there who that's probably not in their wheelhouse or their affordability where Bran like gold's gym with 10s of millions of people around the world conservative

Matthew Januszek 44:06
with a with what's going on it's certainly you see the word health coming up a lot in the news and media and you know whether the stats are true, but certainly people that are overweight are suffering a lot more than than others. If you know if what you read in the in the press is correct, do you think that this situation, putting aside how difficult it is, whilst you're in it, and particularly for companies like yourself were laid off thousands of people and and, you know, not getting any income, but, you know, in terms of as we move through this, do you think this is a good opportunity for the fitness industry as a whole because maybe there's more people that are that are going to be looking at how to sort of, you know, get into more of a healthier lifestyle?

Adam Zeitsiff 44:56
I really do and, you know, there's there's out of every crisis coming something positive, there's a few positive things, being at home a little bit more spending time bonding with the family, you know, all those things, but I really do feel that I hope that people can understand coming out of this, that fitness is an essential part of life. And I think we as we as industry folks have known that forever. And certainly fitness is there to make you look tone and increase muscle mass or whatever your fitness goals are cardiovascular success, all those things, but fitness is really good for the inside. And I think the people who might not have been involved in fitness prior to this are seeing that and realizing that it's not just about the outside, but it's what's on the inside and what having a healthy and active lifestyle and working out regularly will do for you is it is its own set of preventive medicine. And let me be clear, can prevent COVID or anything like that, but it's just gonna keep you in the healthiest state possible help you fight it off with immune systems, you are referred to less than the side effects and things of that nature. And I do think people are starting to see that. And I think we as operators, you know, we have to take the stance of look, we're not A cure all for anything. But we can certainly help you prevent a lot of things, have a stronger immune system respond and recover quicker. And it's our duty to go out there and help people do that. I do think this has presented us with an opportunity for the average consumer and governments and people to see that we are essential. We are an important part of their lives, and we can help in the future more than just on the outside.

Matthew Januszek 46:24
Coming to you now as as the sort of leader of many people what what is leadership look like, as we've gone through this crisis? Is it a continuation of what you personally if done before, or would you say that you've had to take on a different role? And if so, what are some of the things that you've that you've had to do as we've as we've been sort of going through the darkness? Yeah.

Adam Zeitsiff 46:47
It's interesting for me, the way I goals and I run this company with my team, we're very, we're very open. I'm very transparent with my team. Sometimes my HR leader tells me Bluetooth transparent. But I've always maintained that level of transparency and honesty, you know, I send an email out every Sunday night to my entire global employee base. I call it my Sunday night thoughts. And I just send a little information about me personally, what I did with my wife and kids over the weekend, and dogs and a couple things, and then I bring it back to business. And we talk and it's a few paragraphs, and I do that every night. And that turns into more video based messaging for me Actually, during this time, which I think will actually, I'll maintain, that'll be one of the changes is that may go from email every week to maybe email once a month and video a couple nights. But I think, you know, the transparency is key. I don't see that changing. And I think just kind of leading from the front and help letting people know that you're out there with them. You know, and being there and getting out there in the community and showing them and that's always how I love to lead and being in our clubs. I don't see that changing. I think actually, it's now it's more important than ever. People have been through something that they never thought they'd have to be through. We've all said we don't have a playbook for this and that that goes personally, not just professionally, there's no personal playbook for some Like this, we've all had to deal with in our own way. So I think continuing that transparency and communication and just openness with my team and being out there with them is how I'm gonna keep running this company.

Matthew Januszek 48:10
Excellent. So a couple more questions as we wrap up. So I'm going to put you on the spot with this one. And I know it's a baby, just just for fun. But what you know, what, what would you you know, what's your prediction? December? You know, 2020? What do you think? The, you know, the fitness clubs are going to be looking like, by the end of the year, let's say, you know, in terms of the US business,

Adam Zeitsiff 48:36
yeah, I mean, for us, we were thinking it's probably at least a solid three quarters before we can try to get ourselves back to where we were. So I mean, I don't think I honestly just don't think we're going to be 100% to where we thought we would be in December. I think it's probably going to take until you know, next March or April for us, and I think we just need to be smart, adjust accordingly, manage operating expenses, and manage growth and how we engage people and also how we do diversify. You know, it gives us that chance to diversify digital preventative care and other things that we can do in our clubs. But by December of this year, I do not think we will be back to where we wanted to be. I think it'll take another quarter or so.

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