A while back, Robb Wolf—the famous author of the Paleo Solution—hosted MadLab Group CEO Craig Patterson (‘Patty’) and Director of Coach Development Jeremy Jones (‘JJ’) on his podcast. At the time, JJ owned 4 affiliates. Today, JJ is focusing his attention on just one of the locations; the rest of his time is devoted to his MadLab role, and to his gym programming business Thrivestry.
The handsome Coach JJ
One of the concepts Wolf, Patty and JJ discussed was—when we consider Key Performance Indicators (KPIs), such as client retention, lifetime client value, coach retention, coach pay, and business profit— the current ‘Group Exercise (Group X) business model’ that most CrossFit gyms follow today is essentially doomed to fail the client, the coach and the business. Read more in this recent Breaking Muscle article.
For a gym to be successful, it needs to work for all parties involved: The coach, the client, the business. The Group X model works for nobody.
Now, don’t confuse the ‘Group X business model’ with gyms that host group classes. MadLab Group member gyms DO offer group classes to experienced members. By ‘Group X business model,’ we are instead referring to the system, where coaches get paid by the hour, and where the purpose of training clients is essentially to get them—first into an On Ramp group workout—and later into regular group classes. Usually in this system, there’s no real coach development and there are very few full-time coaches (and almost none who make a professional wage).
Here’s an excerpt from the Robb Wolf podcast, where JJ explains what happened to him and his business partners at Diablo CrossFit when they followed the ‘Group X business model.’
Robb Wolf: Patty, I don’t want to diverge too far here but I want to pull JJ in really quick. I know I’ve got a lot of gym owners that listen to the podcast. They’re probably scratching their heads right now and they’re like, ‘Wait, there’s something wrong with group fitness?’ I mean, whether you’ve been in this five years or five weeks, people just look at these numbers and they’re like, ‘Hey, if I charge $100, $150 a month and I get 200 people, I’m…rich.’ JJ, you guys had three locations and a thousand people. What type of money were you pulling down?
JJ: Well, the reality is the model doesn’t work because there’s the eight laws that we’re going to talk about, but what we tried to find out was, ‘Okay, if we just add a few more members,’ and then it was, ‘Oh, we’re going to expand the location. We need more square footage. Oh, we’ll add a location. We got to get a team back to the Games. We got to get an individual to the Games….Oh, we’re going to have the best coaches in the world. We’re going to have the best facilities, best equipment.’ All these features and benefits, we checked off the list. We got it all down.
As we grew and grew and grew, the problem is that we shouldn’t be in the fitness business. We should be in the relationship business. As we grew, we had more coaches. I think right now, our main location is 16,000 square feet, has around 600+ members. We do 23 or 24 classes a day a week day.
What happened was we lost the connection with the members. You know, as I started to be more spread thin and coaching wise, I didn’t have (those) one-on-one relationships…
MADLAB GROUP PRINCIPLE: THE IMPORTANCE OF CONNECTING WITH CLIENTS
Robb Wolf: Uh-hum.
JJ: (Legendary status was given to the) people that have been with me for seven, eight years. There’s about 40 or 50 of them that I did one-on-one (personal training) with when I finally quit my engineering job in 2008. You know, I did one-on-ones (back then) with everybody to start them off and they’re still with us, and then as we noticed as we got bigger and bigger, people were just spilling over. It was like you had this class…it would be 12 or 14 people, and people would say, ‘Yeah, you guys are doing great.’ There are always one or two new people in the class, but it’s never the same people, right? So you have one guy step in and he would be there for a couple of weeks and then he would rotate out and some new person wants to take his place and then he’d be there for a month maybe and then it was this constant revolving door.
MADLAB GROUP PRINCIPLE: THE IMPORTANCE OF PERSONAL TRAINING, NOT JUST TO PROPERLY TRAIN CLIENTS, BUT ALSO TO KEEP CONNECTIONS ALIVE. MORE PERSONAL TRAINING = IMPROVED CLIENT RETENTION!
JJ: When we looked at our systems, what we found was as we grew, we started adding this middle management. We had people who were running the events and people who were running accounts and helping try to stem this hemorrhaging of members. We don’t have managers; we called them pit bosses because it’s more like Vegas pit boss…than a gym management, as they walk around the classes making sure they talk to people and making sure they’re checked in the class and everything. That middle management basically ate up anything that would be considered profit.
MADLAB GROUP PRINCIPLE: AS THE GYM GROWS, A COACH CO-OP SHOULD BE IN PLACE IN LIEU OF A COSTLY MIDDLE MANAGEMENT
Robb Wolf: So I mean, what you had was no ability to scale without linearly increasing costs? So you add another body, then you add incremental amount of middle management and cost. So that it just never was becoming really a profitable enterprise.
JJ: Exactly, and that’s what we found. I mean, Andy (Petranek, founder of CrossFit LA) would even say, as you get larger and larger, your costs increase more and more. You know, if we had kept it down to maybe one location, and we just raised rates, you know, and did more personal training and did all these things, like we would probably be one of the most successful CrossFit gyms financially in the world.
But, we kept growing and part of that was I think we wanted to help as many people as possible. So instead of, you, know when the flood started coming in during the CrossFit golden age, you know, it was not about like, ‘Oh, I should raise my rates.’ It was more like, ‘Let’s try to create a system,’ and we basically used the version of the OnRamp. We turned; we changed from personal training in the beginning to OnRamp-style because we had to handle the flood. You know?
Robb Wolf: Right.
JJ: We wanted to help as many people as possible and then also when we started, as more and more people came, instead of trying to think about profitability and kind of what your (eventual) exit strategy is, we just kept expanding so that we could give the coaches more opportunity and have more people quit their careers and come coach full-time and try to provide more opportunity in that regard. But in the end, you know, I ended up with me and my partners, we have a job and we get paid okay to do our job. But the gym is not showing any real profit, and there’s no real exit strategy.
Are you a gym owner? Can you relate to JJ’s sense of desperation? We might have the solution for you.