Mind Pump: Raw Fitness Truth - 842: The Steve Jobs of Fitness- Mark Mastrov

Starting point is 00:00:00 If you want to pump your body and expand your mind, there's only one place to go. Mite, op, mite, op with your hosts. Salda Stefano, Adam Schaefer, and Justin Andrews. It was so full circle to have Mark Masroff sitting in our studio and interviewing. What a trip, right? It was just weird because that's how I started my career and fitness. That's how all of us started our careers in fitness. I was 18 years old and then I was a baby manager at 19 years old in the company and the

Starting point is 00:00:33 culture that this guy created. And then of course, you know, Masteroff is a legend in the gym industry because he built the biggest chain of all time. Now what he owns now is growing at ridiculous rates. The guys, extremely successful in all the things that, if we take for granted in the gym industry, like collecting monthly dues on EFT, gyms being open 24 hours,

Starting point is 00:00:58 the way that they're organized, where you have a small box and a big box right next to it to kind of all these things he pioneered. And so it's really cool to talk to him. Well, you gotta think this guy impacted, especially you and I, at the age of 19 and 20, you know? It's a long time ago for us, man. Changed a lot and for a minute there,

Starting point is 00:01:17 it was kind of, I was trying to wrap my brain around this feeling that I was getting, right? I really, I was like, try to, what is this? I feel this way and it's an unfamiliar feeling for me, and what I would relate it to, or what I think I can relate it to, because I don't know this, is I have a lot of pent up animosity towards my parents

Starting point is 00:01:38 because of the childhood, and I've had to work on a lot of that. Like it's taken a lot of work for me to love my mother and my stepfather to the best of my abilities and to forge a relationship as an adult with them because of my childhood past. And I see friends and people, I mean, Sal, you're a good example

Starting point is 00:01:59 the way you speak of your father, you speak of your father and such a great, so does Justin, you got a spree of your parents and this light that it's just like, you know, this respect for them, it's insane. And, you know, I don't really have that. A lot of the lessons that I've learned from my parents were a lot of the, they did a lot of the wrong things, you know. And when I think about like Mark Maastroff and the way he's impacted my life in a positive way, especially when it comes to business and leadership.

Starting point is 00:02:29 And it's crazy because it's not like him and I spent a bunch of one-on-one time. That was just culture though. Yeah, but that just shows you how powerful that is though, because it gives me that sense of a feeling of like a parent. It feels like this is like dad to me. You know, I even felt myself straightening up the place before he came in. Yeah. I didn't want him to see or my messy messy room. It's very interesting because I'm I didn't really know the guy, you know, I knew of him.

Starting point is 00:02:50 I knew his name and I knew, you know, like his importance in the company and the culture and. But like immediately I felt the way he's answering questions and his mentality towards things. It's such a direct reflection of you guys and like how I know your character and how you know like you manage that on me. And you know, all those things, it's just, you could just see how he influenced everybody like throughout the entire, it definitely was a direct reflection of his character. Yeah, it's crazy because he brought on training developed and partnered with the leaders of the gym industry today.

Starting point is 00:03:32 Many of them worked with him or partnered with him or worked under him. And some of them do other things. Some of them still work for him. But the thing that I always remember and still to this day, is this insane loyalty people have for him. So it's like, okay, and I met him maybe twice in my career.

Starting point is 00:03:49 At one time, he came to see me. I gave him a tour of the club, and another time I won an award, and he was there, and you congratulated me and all that. But it's funny when you hear people talk about someone like that, you're like, okay, this person must be pretty awesome. And this is the first long conversation I have with a guy. And now I can see, I can clearly see why he led a fitness revolution. I mean, if you go into a gym today, the, if you go into a successful gym today,

Starting point is 00:04:17 that successful gym is standing on the shoulders of what Mark Maastroff built back in the 80s and 90s before clubs really knew how to be successful. The first month to month memberships that were done by him. That was a crazy, if you think about it, now it's like, oh, everybody does that. Back then nobody was doing that. Nobody was doing a month to month. It was like, you would suicide. You can give people an option to cancel whatever they want,

Starting point is 00:04:46 as attitude was, if they don't like us, they should be able to cancel sorts of our job to keep them. And, you know, just a great attitude, and it's pretty crazy to be able to talk to the person that kind of started and created that also. Oh, the first one to show the importance too, I mean, when they partnered up with APEX and nutrition and personal training.

Starting point is 00:05:04 Yeah, I mean, the personal training industry has to think what they did. Yeah, I mean, when they partnered up with Apex and... Nutrition and personal training? Yeah, I mean... The personal training industry has to think what they did. Yeah, I mean, he tells a story in here, you know, it's really great of when he first started in the gym and it was, you know, over 90% women and four trainers, two guys, two girls, and very few people even did personal training. He made three bucks an hour and three bucks an hour and he worked a total of like four hours or eight hours or something like that for a free membership.

Starting point is 00:05:26 So it wasn't even really a substantial part of the industry or income for most of these gyms. And now it's, you know, I also think his story needs to be told because everybody's familiar with Steve Jobs story, right? He starts Apple, then Apple brings in this new CEO and Steve Jobs basically gets kicked out of his own company and then just to come back and destroy it

Starting point is 00:05:50 and just go create and just become a legend. Master off started this company, left, and had to do it and it's done other things and it's a very similar time to story. It's interesting about that because he sort of reveals in this episode like he made sort of off to 24 again. And, you know, I just, I couldn't help but think of that,

Starting point is 00:06:09 like that Steve Jobs, like, resurgence, you know, where he comes back and Apple or the other King's back. I was like, secretly, I'm like, oh, maybe someday, you know, maybe he'll re-face it and, you know, like, show him what time it is, but he doesn't really have to. Obviously, he's got all these other awesome gym franchises he's taken over. And they're all super successful just because of who he is and who he brings into his environment.

Starting point is 00:06:34 He's got the same team he started with, the same people he worked all those years with, now still follow him and still kick ass for him. Right. And if you're listening and guarantee you a lot of 25 fitness people are listening to this right now, or people who've worked through that company, Mark shares some stories on here that he's never, he says he's never shared on any of the public. There's a little bit of mud slinging going on.

Starting point is 00:06:53 Oh yeah. This is a, there's some heat. I was, I was, I wanted, I was trying to get him really stirred up because I remember when he left the company and I remember taking, when the company and I remember when the new CEO, Carl Liebert came in and I remember just being upset, dude, I was upset as an employee, you know, like

Starting point is 00:07:12 I was mad for Mark during those times. So to hear him share what was going on in the big meetings with the door closed and the stuff that they were talking about and the feelings that he had during that time, you know, it made me feel good too because there was a part of me, like if you were somebody like Justin or later who came in the company and you were like, oh no more trophies, oh another compliment change. Oh ripped all of us out from us. Right, all these things are like these things were rolling out and if you're all the way, you know, inside of a small club, mean, there's so many levels disconnect from you

Starting point is 00:07:45 and the CEO that you may not know, like who's delivering this message, right? Like where's this coming from? And I know a lot of people at that time had a really bad taste in their mouth about the company. And I remember always thinking like, man, this was such a... They only knew.

Starting point is 00:07:58 Yeah, if you only knew, this was an incredible company, ran by an incredible man for a very long time and it was such a great place to work for. And it's not the company right now. It's the leadership in this company. And so, man, it was cool to listen to him tell that story. And he's still a behemoth in that industry.

Starting point is 00:08:17 He owns, I mean, UFC gyms and crunch fitness gyms. He's a bajillionaire. He's got all these different, yeah, exactly. He's got all these different fitness brands under him. There's a lot of wisdom in fun stories told in this episode. Now I do want to also mention this month or in remind everybody that Maps Performance is half off. So remember Maps Performance is the Maps program designed to get you functionally fit. So it's lean muscular, but you're also going gonna be able to move like an athlete. That's what the program is designed for.

Starting point is 00:08:48 It's half off all month long. You have to use the code green50, GRE and the number 50, no space. You can get it at mindpumpmedia.com and it is my pleasure to present Mark Mastroff. So surreal to have you in here. For a long time, you were still, I mean, a lot of admiration for what you've done.

Starting point is 00:09:10 And I was a young kid that started working in your company and you were like the God. Okay, yeah. So it's pretty cool to have him. I appreciate that, but yeah, it's never more than what you think. I had a funny story, I was in, we were doing a club with Chicago Bears

Starting point is 00:09:29 in Chicago. I'm building a product for them. And the General Manager runs their football operations. His young guy probably in his mid 30s. And I went in to see him when I was there last time. And he brought me in. He says, you know, I want to let you know, my very first job in my life was working for 24 hour. And he said he came out. he was at college, he worked for 2-4, and then he became like a low level guy in the Houston organization for football. It worked his way up to like a system general manager through that organization, and the bears had just hired him like a year ago. Oh, that's awesome.

Starting point is 00:09:59 So it's pretty crazy. You're creating rock stars, man. You're, we fondly talk about you often and refer to you as the godfather of the, of the gym industry. You know, you started 24th fitness. Now you're doing a lot of other big things. And 24th fitness at the time became, you know, went from one club to, I don't know, 400 something

Starting point is 00:10:19 and became the first billion dollar, I guess, gym, company in the world. And a lot of the ways that Jim's make money today was kind of pioneered or perfected by a lot of what you guys, what you did, what you brought to the industry, because I know before that, there weren't that many Jim's that were doing really well. And that's obviously where we all started.

Starting point is 00:10:43 If you wouldn't mind taking us back to when you started your first club and how you figured all of that out, and how you figured out how to turn gems into a successful. Yeah, and what the competition looked like at the time. Business. Yeah, and it cut me off because I can go on any subjects as long as you want.

Starting point is 00:10:59 So if you say it's too long, let me know. But if you step back in the early days, like you guys, I came out of college, I played ball in college, I blew my knee out, my sophomore year, and rehabbed. And so the docs back then when they cut on, it was a railroad track, it wasn't finesse like today. And they said, you gotta keep your knee in shape.

Starting point is 00:11:16 So when I came out, I joined a little gym near where I was living in San Leandro. And a buddy of mine was working there. And he said, come down, check this gym out. So I went down there and they had equipment. I was familiar with which was called Nautilus and that was used in the rehab world And so when I got into the gym the Owners saw me and I was you know pretty fit at the time coming off sport and he said hey I need trainers. Do you want to work here? I'm like I got another job. I just graduated from college and he's like Yeah, but if you work out give you a free membership

Starting point is 00:11:44 I was well, I don't have a lot of money. I'll take that. And so I started working there like four to eight hours a week. That's all you had to work to get a free membership. And what I found very quickly was it was a pretty successful little 5,000 square foot gym in San Leandro, but it was 99.9% of women. And you're a trainer and there's like four of us and two or girls, two or guys. So I was like, maybe one of only two guys in the gym

Starting point is 00:12:06 all day long with all these girls from town. That sounds horrible. All of these terrible situations. And if you hit the town at night and you're at whatever the place of the venue was, you knew everybody. And guys like, how do you know all these girls? So I'll train at my gym.

Starting point is 00:12:21 So I worked there for probably like six months and then the owner of the gym came up to me and said, I'm selling the gym, I'm moving back to LA and I want you to come with me and I was like, well, nah, I'm gonna, you know, step here. I've got a girlfriend where I live, my family's here, I don't really care, move to LA. So he said, well, I got a guy buying the gym

Starting point is 00:12:37 and he liked to talk to you about running it. And I was just a little trainer there, I'd do a little sales once and well. So this guy came to approach me, so look, I want you to be a partner with me in this gym and help me run. And I said, well, what's a partnership mean? He says, well, you can invest with me.

Starting point is 00:12:50 And if you have $15,000, I'll sell you like 10% of the gym. And I didn't have $15,000 at the time. My parents didn't have $15,000, but my grandmother had a little bit of money, so I hit her up and she let me borrow it from her. And so I took that 15 invested in it. And then this guy really came in to build a software front end system.

Starting point is 00:13:10 And so we created a Mag Stripe system. This is like mid 80s that would control the front entrance into the gym. And then we had a software system that would control payments and everything else. Now was it the first of its time? Like before that it wasn't done like this, right? No, it was no way.

Starting point is 00:13:24 Nobody had anything. And he came out of the automotive industry where they were starting to use mag stripes to register your car for maintenance, et cetera. That's what his bag is. His name was Gene Heckerman, super smart guy. So I ran the gym and then he brought a programmer at night. For the next two years, I sat there and learned

Starting point is 00:13:40 how to program in D-base, which was the vote software at the time on how to build a front end system. It forced me to think about everything from the moment someone entered to the moment someone exited and the building and the collections and the maintenance and how to train and develop your staff. It really got me to think hard about the business and I kind of grew it from there. We set this platform up and we started opening a couple of gyms and then I started selling the software.

Starting point is 00:14:04 I'd go out to, like, I remember there's a gym in San Francisco that bought it, and they said, can you come help us run our gym? I'm like, what do you need? Says, we're not doing well, come take a look. So I drove in the city, that a very successful club from where I could see it was busy.

Starting point is 00:14:17 But when I got in there, I said, let me see your financial statements. He went into his office, he came out with his bank statements, like the deposits and credits. And, and, Depp, it's not like, where's your bank statements? These are bank statements, right?

Starting point is 00:14:30 I'm like, well, no, that's not a bank statement. I have to interrupt you because the thing that, that 24-finties did so damn well was the systems that they had in place. The, you know, from reading, you know, guess that came in the door, people who enrolled, who didn't enroll, what kind of memberships they got, all of this stuff was, and I took it for granted as a kid because I thought this is how clubs ran.

Starting point is 00:14:53 Nobody, this is brilliant. Nobody would be able to do it. I've had analytics like that available. Now were you also, at this time, did you guys start doing EFT at this time as well? So I went to Seminar, probably again mid 80s, and a company was called Check Free, and they said, we've got this new method of payment where you can build people through their checking account

Starting point is 00:15:14 or their credit card, and they can pay it. So it seemed brilliant to me. In the early days of fitness, you charge it up front fee, and then an annual fee. So we were charging around $300 to join, and maybe a hundred bucks a year thereafter. And when people paid $300, it wasn't always easy. So I went to this check-free seminar and I said,

Starting point is 00:15:31 well, geez, I could switch this around. I could charge them 300 bucks up front and then $6 a month in a perpetuity. And so it was much simpler than I could break it down where if you didn't want to pay the whole 300, you could pay part of it on a monthly payment basis. And so we created this relationship with Check Free, we were like the first gym chain to do it,

Starting point is 00:15:48 and we built it into our software so we could manage it. So if you didn't pay, we'd know when you came in the gym, a little red light would come up on your, you know, tag as you came on the screen, and there's steps just could say, hey, you owe us money or not. And we created all kinds of systems over time and then developed it.

Starting point is 00:16:01 And then of course, we had to train the sales staff to sell six dollars, and people would, you know, totally say, you're not getting into my checking account, you're not getting into my account. A then of course, we had to train the sales staff to sell six dollars. And people would totally say, you're not getting into my checking account. You're not getting into my account. A lot of resistance are really on. It's tremendous. But we slowly overcame every objection and got them comfortable and showed them

Starting point is 00:16:13 how the banks managed it and they controlled it. They get their money back if they're uncomfortable. And over a year or two years per year time, we could take that $6.07 to 20 to 25 to 30. And pretty soon, instead of getting $300 a year and a hundred bucks a year thereafter, if you could, you're getting $30 a month. And then we made a big decision,

Starting point is 00:16:31 which was everybody at that time, ballies and all the big chains were contract-based. So if you came in, you signed a three-year contract. And we used to have people come in all the time, saying, well, I can't join them in this contract. I like your gym better. Or we got into dispute, and they took me to court, and I hate gyms. So we made a decision and said, they know what, we can't join them in this contract. I like your gym better. Or we got into dispute and they took me to court and I hate gyms. So we made a decision and said, you know what, we're just going to charge month to month

Starting point is 00:16:49 and have no contract. The foresight for that is insane because it's almost like I can imagine being at that time in that industry where that was the norm was contracts. And it's like, I'm sure, were you getting pushed back? We're like, oh, you're crazy. If you let people cancel whenever they want. Oh, everybody thought we were crazy, but I thought it was the right thing to do

Starting point is 00:17:07 from a consumer standpoint. I try to always put myself in the other person's shoes, whether you were part of our team or whether you remember, or just the consumer groups, because if you step back and you're trying to collect a contract, I don't want to knock on your door and say, hey, you owe me 30 bucks, that's kind of silly. It's like, look, if you don't want to pay,

Starting point is 00:17:22 we're not doing a good job, it's on us, because we're supposed to service you, take great care of you, and help motivate you to be in the gym every day. And if you are, we's kind of silly. It's like, look, if you don't want to pay, we're not doing a good job, it's on us because we're supposed to service you, take great care of you and help motivate you to be in the gym every day. And if you are, we're doing our job. If you're not, then hey, you know, go someplace else and find success there or go outside or just don't train at all. But we thought the honest was on us to service you. Well, what it, and how important is EFT now to being able to collect money, first first of all through checking a credit card, which now we take for granted, and being able to give people the option

Starting point is 00:17:49 to cancel whatever they want? How important would you say that is now for gyms to be successful? Well, it's the norm, right? Some gyms even 24 hour now under their new management have gone back to contract. And so they have contract. And what they do is they lock you up for 12 to 24 months.

Starting point is 00:18:05 And if you don't want to be on contract, you pay more, maybe $10 more a month to have the monthly option. So everybody's kind of played it out a little bit different. I'm still adamantly opposed to contract. We do everything on a month-to-month basis. But it is the norm of what became in the industry. And a lot of people adapted what we put in place and checked for you went around the country to their credit saying, hey, go look at these guys.

Starting point is 00:18:24 So people used to come out and meet with me. I'd show them what we're doing and they would adopt it and take off. But in the old days, you'd sit there at the end of the month and you'd have no cash flow coming in. So you'd do your $50,000, $800,000, you'd pay your bills and you have to start all over and you have to grind it out again.

Starting point is 00:18:37 Where now you had people that were paying you each month and you had a recurring revenue base to pay the bills and pay the employees and have some cash flow to grow your company and took pressure off of you. So you could spend more time focused on servicing your members and helping train your staff than you were about trying to sell a collect cash. Right. So what was the scaling process like?

Starting point is 00:18:55 I mean, the minute that you switched over to this, did it, I mean, take off right away or did it take a while for it to start to scale? And what would that look like with your major pivotable moments during that time? Yeah. great question. It took a long time because the consumers had a hard time with this process, but we stuck to it and $6 turned in seven, turned to eight, eventually like I said, turned into 20.

Starting point is 00:19:14 But as the cash flow grew, then what was really interesting is you try and grow your business. And if you went to the banks, the banks would just laugh at you. They had nothing to do with fitness centers in the late early, early 90s. We built up, and our first 10 years, our think our business was doing about 48 to 50 million in revenue, about 8 million in cash flow. But if I went to a bank and said, look, here's a very profitable business, we've built

Starting point is 00:19:37 it. No debt. We don't have one loan on the business all through cash. We want to borrow $2 million to build a gym or open a gym. They just laugh you out of the room. Oh wow. Because there's no guarantee. There's no guarantee revenue or whatever. Gems had a terrible reputation. So many had opened and closed over the years. That the banks just had a black cloud of our industry. And it took a long time for a lot of us, especially our group, to slowly build relationships where you could borrow a little bit of money to grow. So we grew

Starting point is 00:20:02 our first 32 locations to get to this, you know, 8 million cash flow, totally out of the profits from each gym. So when one gym made money, it opened a second, when that made money between the two, you opened a third and you slowly grew. We couldn't borrow money, we couldn't get debt, we couldn't get any kind of lines of credit.

Starting point is 00:20:19 Everything was purely out of cash. Kind of a blessing in disguise, because our fitness remained private for so long and got so big because it was built on such solid financial foundation where you're like you're saying one profits and then it fuels the next one. Now when you first open it was notless. So it was 25th not us. Were you in partnership with notless equipment with Arthur Jones and all that or was it just using the name? No,

Starting point is 00:20:42 Dave gave you a great story. So when when that little gym was opened up, the guy that opened it called it Nautilus Health Spa. And so when I got in there, it was Nautilus Health Spa, and a lot of people say, okay, what happened to 24, how did that start? And what really was is that I was in there opening the gym the morning at 5, and I was closing it at 11. I mean, I didn't have much of a staff.

Starting point is 00:21:04 And at 11 o'clock, I try and outshore everybody out. People be in the showers and by the time they got out there would be midnight, I'd go home and I have to get up at 4.30, drive down open the gym. I was fried. After about 90 days, I barely could see myself. So I'm doing something wrong here. So my janitorial group was coming at night

Starting point is 00:21:20 and they'd clean the club at night. So I started flipping the keys to these guys and saying, just block up and open up. Cause they were there probably six, seven hours at night. The guy started telling me that, hey, people aren't starting to knock on the door at four o'clock. I let them in. I'm like, my, sure. And he said, people are staying to a one o'clock.

Starting point is 00:21:33 Really? What are they doing? He says, guys are just staying. They're working out, pounding. They're coming in at midnight. And I'm like, yeah. So I start talking to people and I realize there's, you know, factory down the street coming in.

Starting point is 00:21:43 There's police that get off at weird hours. There's medical, firemen, there's all these people that aren't being serviced. And so I said to myself, well, what if we just open up all night? So I found a kid that worked for me named David Tensu, who I'm still a good friend to know. Oh, I know you. You know, Dave, right? You probably worked with Dave.

Starting point is 00:21:59 So Dave was, you know, in college, and he says, look, I'll work the graveyard shift. So he worked 11 to 7 and he worked those money through Friday, and we opened up 24 hours of money through Friday, and we'd close the nights on the weekends. And then I said, well, shit, let's just throw the number up there, put 24 up there, and that's how we turn to the 24 hour nodal. And that's kind of how we took it for. That's so brilliant, because I don't think any gym

Starting point is 00:22:18 was open 24 hours at that time, right? To maybe somebody's someplace. I don't think so. We always say we're the first, but it's always something. I opened up six months sooner, and I was laughing great, whatever. But nobody knows where. Yeah.

Starting point is 00:22:29 What were the growing pains like taking, because I know one of the things that people struggle with after they make one gym successful, is trying to duplicate that on two, three, four, five. Very, very rare that somebody can do that. So what was that like for you going from one gym to 30 something gyms and making that kind of money, were you able to stay true to your brand and your vision, or would you have a lot of ups and downs?

Starting point is 00:22:56 Yeah, it's a good question. The hardest, I was told by the hardest jump is two, one to two. It's so hard because you're in that one all day long. It's you. You build a culture, you're in that one all day long as you build a culture. You're in there making every decision. You're helping everybody. But then you go to two, you're split between two. And now you have to hand off.

Starting point is 00:23:12 And then you go two to three and three to four. You really hand off. The advantage for us was we just really got lucky and found amazing people. Guys like David Tenshio and then we kind of expanded and picked up guys like Don Harbick and John Romeo. These people that came into the organization that added culture and experience and were just amazing at what they did and they helped us build our company and over time as you get to 10,

Starting point is 00:23:36 20, 30, you have guys like you that show up on the doorstep and you recognize talent and you start to motivate and you start to motivate and you start to promote and you start to compensate and you drive people up the ladder and people lead us. We're going to talk about your leadership skills in a second because I 100% identified that you, there are people now who are running fitness organizations who are running chains or owning their own chains who started from you until the day they'll credit you and your leadership. And people are always so loyal to you in the organization even when it got massive.

Starting point is 00:24:09 So I want to get into that. But before I do, there was a very, there was one point where the company or 24 Fitness grew very rapidly. And it's when it went from 24, not a list of 24 fitness when you merged or bought, or I'm not sure what happened with Ray Wilson's family fitness centers. And I think at the time, if I'm not mistaken, 24-nodalists might have had 70 clubs,

Starting point is 00:24:31 and then when they merged it was over 120 or something like that. How did that happen, and how did you guys find each other? Yeah, so I'd met Ray, Ray's a legend. He's, you know, 90 years old right now, living down in Mexico, I hope I lived to be 120. God, the trains. 10 hours a day, he's nuts, but he's one of the sharpest guys ever been around the industry. He probably would sit here if you ever interviewed him

Starting point is 00:24:53 and it'd be a great podcast to do. He has built and sold more companies than anybody. He's also had more companies go bankrupt than anybody he've ever met, you know, monster companies. And I could tell you stories, I could do a whole five hours on him, but you guys would be in tears, you know, monster companies. I could tell you stories, I could do a whole five hours on him. Oh, shit. You guys would be in tears, but he's a pioneer.

Starting point is 00:25:08 And so, Ray and I had a handshake that neither of us would enter our markets. You know, I'd see him at trade shows. Oh, wow. He was down in San Diego and SoCal. And I was up in North Cal. And he's like, look, I know you guys, you do a great job. I don't want you to come down to SoCal, mess up my thing.

Starting point is 00:25:22 I won't come up to North Cal. I said, fine. I'm not know anything. Shit. I'm not going there. So I'm in NorCal and then one day I hear there's a gym opening up in San Jose and it's a family fitness center, Ray Wilson's. I'm like, what the hell?

Starting point is 00:25:36 Oh, sure. I go check it out. And then here's a second one opening up in free, my like three blocks from our gym. So he broke the treaty. Listen here, motherfucker. He broke the treaty, I said, fuck that. Yeah, our gym. So he broke the treaty. Listen here motherfucker. He broke the treaty, I said fuck that. Yeah, yeah, it's all in the show.

Starting point is 00:25:48 I drove my car over and there's a guy named Eric Levine, the famous Eric Levine who's running the gym in Fremont. I drive in, I'm like, oh nice to meet you. You know, okay, I got the game now raised. He says, Ray, you know, it's gonna open like 20 clubs up here. It's okay. So I hopped on the plane the next day. I flew down to San Diego.

Starting point is 00:26:05 I immediately rented a house down there in La Jolla. I shopped the whole market and I got two sites signed with him. And the difference between the two groups is Ray built small 15,000 square foot to 20,000 square foot gyms at the time, which is kind of like what planet does now. I was built in 40,000 square foot gyms at the time, which is kind of like what planet does now. I was built in 40,000 square foot gyms with basketball courts and pools. So big daddy comes in. I came in, I dropped two bombs right between these clubs, and I sucked him dry. I said, game on there.

Starting point is 00:26:38 We built them fast. And I transferred a kid down there who you made on him, Curtis Harmon. Curtis is a legend. Curtis was a stud. So Curtis went down there and we may know name Curtis Harmon. Of course. Curtis is a legend. And Curtis was a stud. So Curtis went down there and we built these two clubs and we put like 10,000 people in both clubs in a year. We went nuts. And Ray call me and says, okay, we have to have a truth.

Starting point is 00:26:55 I said, there is no truth. So I'm open and 50 clubs in your market. Oh, you shit, you're telling that. Oh yeah, he said, we got a meat. So we met. And so I went out and raised some money with a group called McCown to Lou Baster in the Bay. And we raised some capital, we went and bought Ray out,

Starting point is 00:27:12 we merged the two companies. We only had 34 locations at the time. And he had, I think, 70, just 68, he had 68. So we came in with 102, and that made us the number two chain in the country behind Bally's and that kind of launched us and We learned a ton from Ray Ray was a great operator He managed everything very tightly and I was a little bit looser I was more about paying people a lot of money and giving people rope to learn and letting them make mistakes

Starting point is 00:27:37 But kind of build their own business units. So we had a difference in philosophy. Oh, what a perfect marriage Yeah, you got you got culture people guy meeting with systems, guy and organization guy. That's why I was asking, how was that to merge culture? So I used to hear rumors when I started at 24 hour. Now, when was that year that you guys merged? 96. OK, see, it was the year before I started

Starting point is 00:27:57 24 hour fitness. And I remember when I came in, people would still talk about when that happened. And there was still this competitive like the managers from 24th Fitness versus the guys from Ray Wilson's and who does what? And we do things a little bit differently. And what was that like?

Starting point is 00:28:13 How were you able to merge that? Were a lot of those people able to last or did they all, the lot of them have to leave? No, we kept a lot of people. Ray paid his people as partners so he had a lot of guys that invested alongside him. So he had a little different structure. We had everybody as one company,

Starting point is 00:28:28 then you had shares inside the company. So a lot of our guys own a piece. And then Ray's, each club would have a different group in there where Ray might own 80%, he might own 20%. So we had to bring all that together and he had great operators, you know, guys like Ron Thompson and Ray's two sons, Perry and Paki, Steve Kleinfelter, I mean hundreds of of guys were really, really good at what they

Starting point is 00:28:48 did. So we took an approach that I would just come to his meetings once a week and sit down at his marketing meetings and meet with the team. And then I would try and integrate things we were doing in Northern California that could help benefit their business. And the first thing was that I created what I called the hub and spoke, which was that all these small boxes that were, I called dry clubs that were on monthly dues, I said we need to put some of these big boxes in between them and then upgrade your members to get access to it. So we would create what we call a sport and a super sport and that's how we create these acronyms. So I would begin to build these big boxes and the family guys at first were like that's silly

Starting point is 00:29:23 It's stupid. They don't make money, it's too high overhead, they don't work. I said, well, let's build a couple and see. And we dropped these big boxes in, not only did they crush it, all their little boxes were upgrading people to the higher dues and they were tripling the profits. They were like, oh my God,

Starting point is 00:29:36 it's the greatest things since sliced bread. So that helped grow us and then we became tighter. And then we added in personal training and ancillary businesses. So family didn't have any PT, no retail, no nutrition. And we had built all those business units. I remember going down to family and walking them through how personal training would work

Starting point is 00:29:54 and how it would be a great service for members and help get them in greater shape and endure them to the brand, et cetera. Most of them were against it. So Ron Thompson kind of led the organization for Ray. And they put it in place. And I think after six months the number one club And family was doing two thousand dollars a month. Mm-hmm. It's kind of ridiculous. I could do that in an hour

Starting point is 00:30:13 Ron's basically said we're gonna create a fine system if you don't do five grand this month You get fined a thousand dollars. That's kind of how their culture worked for the ownership group and the managers So they create a fine system. So One of the guys went out there and said, I'm gonna show you guys I can do it. He did like 25 grand that month and it opened up their eyes and pretty soon they started doing 25, 50, 100 grand a month

Starting point is 00:30:34 and they started realizing that, okay, the guys in North do have some good ideas. I was just gonna bring this up with personal training because I remember when I first started Hillsdale, not where it is now, but the old Hillsdale, that's where I started. When I walked in the doors, I'm 18 years old, and the club's goal, now Hillsdale, even at the time, was considered a big club. I remember the club goal was, compared to now, wasn't huge.

Starting point is 00:30:57 It was something like 14, 15 grand for the personal training. The top trainers at the time were selling. And now comparative wise, they were crushing it compared to other gyms because I think you guys made personal training a big thing. It was you guys that really brought personal training to the mainstream or at least made it profitable. And I remember going in there, eventually becoming the fitness manager and then that club was producing upwards of $100,000 a month in personal training. You have a background in fitness,

Starting point is 00:31:26 you weren't just the sales guy or a business guy, how were you able to see that foresight about? Because it doesn't seem like the super profitable thing at first, right? How are you able to see that with personal training? Well, people were doing it, it wasn't just us, other folks were doing it, but what we found when we wanted to go after

Starting point is 00:31:41 enhancing members' opportunities was, is that if we could get them into gym with a trainer, then they could move faster to get to their goals. And then they became what I used to call walking billboards. It'd show up around town, like, you look amazing, what happened? I lost 30 pounds and I've been pounding the weights, and I'm in great shape.

Starting point is 00:31:58 I've been doing more cardio, I'm training for a triathlon, I'm working with a personal trainer, down to 24 fitness. And people started getting exciting about it. And it created a career path because we could bring people in now as a trainer I used to work for three bucks an hour. It's kind of a joke of a job, you know I probably hurt more people than I helped I was doing so we hired a guy in a guy named Chuck fields and and we built an entire training system because there wasn't Nazum out there with Mike Clark and all these brilliant guys we We created our own training system, and we would certify everybody, and made sure they know what the hell they were doing to protect the member and the guests

Starting point is 00:32:30 and everybody from their workout program. And then we started to recognize if we get everybody in to train three sessions free, then they can buy personal training and enhance. We got a certain number of the members to do it, and it pushed them faster, but it created a great career path for people in star organization to come and make pretty good money as a kid, maybe 19 to 20 years old. It was brilliant. That was my first certification. And then I remember the fit start. That's what it was. It was three session fit start. And then that's how I got all my clients. And which takes me to another question. You guys at that time were paying people compared to anybody else in fitness and sane amounts of money.

Starting point is 00:33:06 There were general managers making well into six, I made six figures at 19 years old running Salinas. That was the first club that I got to run. Great club. And I was a, I was a 19 year old kid in the fitness industry. Nobody's making that much money in the fitness industry. Back in 1998, what got you, and I think that's part of the reason why, not all the reason, part of the reason why people were so loyal to you, is you paid them well. What made you think of that?

Starting point is 00:33:29 Because nobody made money in gyms before, especially if you're working in gyms. Yeah, I used to tell everybody, and this is my focus. I never focused on making money personally. I focused on making everybody as happy and as wealthy as I could. And I figured if everybody's doing well, I'm going to do well. And so, from the very early days, I said, whatever everybody else is paying, I'm gonna make it one half to double.

Starting point is 00:33:50 Because I felt like the best people would be here and it's all about talent acquisition. And then I want to give everybody the opportunities. So I felt a good manager should make between 120K. That's what they should make, whether it's 18, 19 years old or 25, that's what they should make. A good regional should be somewhere between 160, 180 and the VP should make 250 to 400. And I used to have said in means all the time, people would say that you're way over paying

Starting point is 00:34:13 your people. I said, I think we're way underpaying them. For the amount of time, energy, effort, hours to build the brand to get after it, I just felt like people should make as much as they can and have it unlimited. And I know that when I came out of college and when I get into the workforce, I wanted to find a commission structure where I could make more. And I felt like sharing it with everybody made sense. And I think the model proved out to be the right model because we had great talent organization. And I think the folks that have left us and moved on have taken that same strategy of paying people extremely well.

Starting point is 00:34:43 I know if I talk to the Curse Harmonies of the world, know if I talk to the curse harmans of the world, or if I talk to the Steve Blocks, or even the David Tens, so whoever's out there, they're paying people at high levels compared to the rest of them. You created a culture for sure. I remember that culture very strongly. So I was so strongly influenced.

Starting point is 00:34:57 Do you remember giving me, coming to my club and having me give you a tour when I was 18 years old? I remember because my sister lives down there. So that's the reason we went into Sleens because I started traveling down there a lot because a lot of people were like, don't go to Sleens, don't go to Sleens,

Starting point is 00:35:10 but I loved Sleens since she was living down there. I remember coming in, and that was a great club. I loved that club. Yeah, I was a really young kid and you came in and you wanted me to, you're like, all right, show me, and I remember what it was, and we were doing some pretty insane numbers. There's an AGML selling something like $50,000, which at the time was, and you were like crazy pretty insane numbers. As an AGML selling, something like $50,000,

Starting point is 00:35:25 which at the time was, and you were like crazy. Yeah, and you were like, all right, you got to show me what you're doing. And then what I did is I gave you a tour, but because I was a trainer originally, the tour I gave you was about how to change your body, how to get in shape, and I sold you training first. And then the membership'd come alongside it.

Starting point is 00:35:42 And I remember you looked at me, exactly what you said. You looked at me, said, that's smart. And then you shook my hand and I told you, give me a club and then you said you're too young and then you woke up. I remember that. You took it from yourself. The funny part about that is that came full circle

Starting point is 00:35:55 because not long after you blew up all the numbers there, for many years that became the club where it was like, you got sent if you weren't performing. A lot of district managers started sending their guys out there. If you weren't, it was like you're on the way out. First we let you have like your mid-range club and you get promoted up, then you weren't performing. A lot of district managers started sending their guys out there. If you were, it was like you're on the way out. First, we let you have like your mid-range club and you get promoted up, then you're not performing,

Starting point is 00:36:09 then you come down and then okay, your last chance is, here's Salinas, let's see if this turns this guy around. And I remember, and you gotta tell the story how this happened, because I think there was a time when you guys were about to close it and shut it down, and I believe that's when you put our good friend, Larry Evans in that place. Do you remember that whole thing

Starting point is 00:36:28 and how that went down and what was going through your head? Like were you gonna shut it down or what? No, I think we were coming towards the end of the lease. And so it had a 10 year horizon. We had to decide to relocate it or keep it there. And that center was getting a little bit tired. So we're trying to figure out what we wanted to do. And Larry was a stud.

Starting point is 00:36:43 I mean, Larry put Larry anywhere and he could write gross. So I think the team said, hey, let's put Larry down or suit we could do. But my family was down. My sister was down or so. She was in the gym every day. I got a lot of inside. Probably too much. At times, it kind of swished her head a little bit. But it got a lot of attention. But ultimately, you got to make tough decisions sometimes when these leases come up. Right. You got to say, we're going to stick or we're going to move. And generally, we like to relocate whenever we can to kind of freshen because after you're in a box 10, 15 years, it's time to pick it up and move it into a new one, build a brand

Starting point is 00:37:15 new one. Now, I want to talk about your leadership because that's what always came up. That's what I always heard about. And I worked with John Rom Romeo, Don Harbick, some of these leaders I managed, Sunnyvale and Hillsdale and some of these big clubs. And anytime I met someone who'd been in the company for any longer than five or six years who knew you, they would always speak very highly of you and your leadership. And they were extremely loyal to you, which you don't see very often when people work at a company,

Starting point is 00:37:44 you know, if somebody leaves or whatever the boss Nobody cares. We had this crazy loyalty almost like the Steve jobs of you know It was it was different. It was much different There was a different experience when you left as well, which I want to get into but let's talk about that leadership Like what was it that made? These people so loyal to you how how did you develop this culture within where people, it almost felt like they would bleed, we used to say bleed purple, you know, the color of 24th and say what was that that you had?

Starting point is 00:38:09 Sure, we're in the Barney's back in the day. Yeah, it's hard to always describe that in full to answer your question properly. But I think the simplest way for me to explain it is, I believe that the pyramid is upside down, you don't work for me, I work for you. I believe that if need something I'm there for you whether it's personal or business or whatever it might be And so whether it's tough times or good times. I'm always there And you know, I put a lot of time into building relationships and being there for all my team

Starting point is 00:38:38 And so the pyramid is upside down. If Don Harbock had an issue. I took care of it If your goal was to own a car, I helped you get it. If you wanted to buy a house and had trouble qualifying, I found somebody that got you there. If you had a situation that came up, I'd try to resolve it for you. And my goal was to do what you need me to do and always be there for you.

Starting point is 00:38:56 To make sure you got paid well, to make sure you took some money away, make sure you didn't blow it all, to make sure we went on trips, I had your back. And I just believe that in the upside down pyramid, I just believe that I work for everybody else. No one works for me. And there's no one's gonna outwork me.

Starting point is 00:39:10 I'm gonna be the first one in the last one out. And I'm gonna be as honest and forthright with everybody until like it is. But I'm gonna be there when you need me. And if Jim Rolly calls me and says, Hey, I need something, I'm there for him. If Mike Fini, who is one of the studs of all time, needs something for me, he's got it, whatever it is.

Starting point is 00:39:27 You day off, get out of here. And there's times, even like a John Romney, who would never take a day off. I'd come in and say, okay, here's two weeks of Hawaii, I'll see when he get back. And he'd be like, what the hell, did you're out of here? Fuck you, go.

Starting point is 00:39:39 I think he'd go for two weeks. And he'd tell everybody, master of semi-dewa, I got banished and they'd be laughing around. But I just believe that I'm there for you. It's not the other way around. And I'm not going to ask you for anything. I'm just going to always be there. And that definitely worked because the production

Starting point is 00:39:55 was insane. Well, you saw left pretty early. Justin came on after you. I had the pleasure of having both. So I had you for five years, and then I had, I had 24 of fitness for five years after, and I've waited a very long time to get you in here to talk about that transition,

Starting point is 00:40:14 because as one of your top performers and leaders in the company during that time, it was a very rough time for me, because I had grown a lot of loyalty to you. I'd won every Hawaii year that I could possibly win that we were there. I'd set a bunch rough time for me, because I had grown a lot of loyalty to you. I'd won every Hawaii year that I could possibly win that we were there. I'd set a bunch of fitness sales records, and you were always like that.

Starting point is 00:40:30 You always took care of the people. I mean, I, Don Harbock would always send me and Larry over to Warriors Games and tickets to Kings Games, and we'd get stuff like this whenever we have a great month. And I felt appreciated for the hard work, and it just made me work more. I mean, I took pride in just working as much as I could because I felt like that was always a return.

Starting point is 00:40:51 Now I remember when there was talk about, okay, we might be trying to go public or they might be trying to sell. And I remember seeing the comp plan starting to change and for a guy like me that was, and I saw what they were doing as a company. You know, I saw that we were trying to make this kind of even playing field. And you it was. Imagine eyes everything. Right. And I think their theory was to bring up the bottom feeders to more middle the row.

Starting point is 00:41:20 But then what it ended up doing was the few of us outliers that were super high performers, it was cutting into us, you know, because I'd rather make a percentage of crushing goal than to get a higher salary because I'm going to go over so much. So it really started to affect guys like us. Talk to me about that transition when you're still on the board. So you haven't completely left and you are starting to we're starting to see that change what's going on with you on the on the back end. Yes, it's a long story. I'll give you a soundbite. You dig in where you want. You just stop me and say, hey, hey, and I'll fill in the blanks. But so Macau and DeLue was that early investment group we

Starting point is 00:41:58 brought in. They put a little bit of money into the company in 95 and so we could go out and do that. Ray Wilson deal because I start talking to Ray in 95. It took about six months to get the deal done in the summer of 96. So we raised some capital, it wasn't a lot, and then we went got some bank money and bought Ray out, and he merged some stock in. And so what happens in these investment groups

Starting point is 00:42:17 is when they hit the harvest period, it's usually near 10. So they can invest their money over a 10-year period of time and they got to kind of cash it out. So, McCown D'Loucane and say, hey, look, it's time for us to leave. And we want to run a process and see if we can find a buyer to take us out.

Starting point is 00:42:31 I had no intent to sell or leave. I just would keep my stock like I had been all along. You know, a big chunk of the company just keep growing. And so we had an unbelievable process where we brought bankers in. And everybody showed up. It was like the hottest thing of the time for whatever reason, just the right timing. And we probably were looking to get three to five good bids

Starting point is 00:42:51 at the end, we had like 19 bids that were all over, call it a billion four at that time and they're going up. And we had people like Howard Schultz coming in with his fun, Mike Milken came in with his fun, even Phil Knight and Nike came in, they don't buy anything. We had everybody at the table. Oh shit.

Starting point is 00:43:09 And so I'm talking to everybody, and it's getting hot. And then we had a group come in at the end called Forreston Little. And Ted Forreston was a storied investor. He built Gulfstream, was his big high flyer, built it to like a eight billion dollar company. And he showed up and said, hey look, I really want to buy the company, but I want to preempt everybody else. And I want to put a big number out there and just buy it right now. No contingencies.

Starting point is 00:43:32 You can take all the cash off the table and I'll close right now. But I want to buy 100% and which kind of took me back a little bit. Every other person I talked to, whether it was TPG or Bane Cap or whoever might be said, you got to stay in the deal and run this thing. Ted shows up and says, I don't need you, I can run it. Fuck. I was like, oh no. So I went to the board and said,

Starting point is 00:43:52 you know, this guy wants to put a big number out there. And so, but he doesn't need me to stay. He just wants me to stick around the board. He's gonna bring a management team. He says he can run it. I don't think he knows what the fuck he's talking about. But it's a big number. Do you express this to the board?

Starting point is 00:44:04 Oh yeah, we have a conversation. So we have some other guys in there that are bidding pretty high. So they said, well, what do you think Ted's gonna bid? And I said, well, I have no idea, but he wants me to fly down to dinner. So I flew down to LA once his house for dinner and we sat down just me and his guys. He said, we wanna buy, what do you think we need to pay?

Starting point is 00:44:23 And I said, well, you probably have to out bid everybody by a hundred million plus to get the attention of the board. I said, but one of the big issues is you want to take me out and bring somebody else in. And I'm worried about the future of the company if you do that. And Ted said, well, look, you can stay as chairman, you can help guide us by, I like to bring a new management team. It's what I do, it's how I've done it.

Starting point is 00:44:41 It's what I did at Gulf Stream. I think I can blow this thing up. Blah, blah, blah, blah. So I've done it, it's what I did at Gulf Stream, I think I can blow this thing up, blah, blah, blah, blah. So I started, well, give us a number and writing and give us your offer in a portal, take a look and we'll decide. So he came in the next day and said, you have 48 hours to make a decision, here's my number, there's like a billion, six, eight, I think there was a number of those. And so it was a lot of money in the board, said, what do you think?

Starting point is 00:45:00 I said, well, look, if the guy thinks I can retire, then I can retire, but he's not gonna get a no comp for me. So it means I can go do what the hell I want. No competition, it causes out. Cause usually they wanna lock you up for three to five years. And I want this, I like 10 things I wanted. So we counter back, okay, but Master of, you don't have a non comp from him. And he wants these 10 things and he greet him.

Starting point is 00:45:23 And so, got the deal done. So I ran the business, you know, Brian Bulma ran the US, Brian was like to tell you stories about Brian. Brilliant guy, he ran the US, you had two senior guys overseeing it with Jim Rolian and we had Asia with Steve Kleinfelter at the time. We sold Europe a couple of years earlier. And so Carl steps in,

Starting point is 00:45:42 well, 10 steps in to run the business. I'm in as Chairman's CEO. I take us through O6, we crush our numbers. And then O7 comes around, Tesla's like, I want to go higher guy on the outside. I'm looking for these qualifications, military, six sigma, big box experience, et cetera. This is Carl Lieberton.

Starting point is 00:45:59 He brings in Carl Lieberton. So, Carl comes out, I interview Carl for like two hours. I think he had four hours with me. Well, I looked some clubs, I spent two hours with him had four hours with me. He went and looked at some clubs. I spent two hours with him. And then he was one of many candidates we were talking to. He worked at Home Depot at the time. And Ted called me the next day and says,

Starting point is 00:46:13 what did you think of the Libert guy? I said, you know, pretty good guy, but I only got two hours with him. I need like a couple days to give you a feel for what I think. I need to do some background on him. I want to read some of the information of what his prior jobs have said.

Starting point is 00:46:25 He was at Circus City, they went bankrupt. He's now at Home Depot, looks like a pretty good company. He's okay, well, I'm gonna interview him, then I'll send him back out to you for a couple of days. So next day Ted calls me, he said, interview Carl, I liked him, I hired him. Wow. So that was the beginning of the Carl Lieber era.

Starting point is 00:46:42 And Carl came in and Carl is an interesting guy. I think his intent from the first day was, I want to be the man finally. I wasn't at Sturker City, I wasn't Home Depot. I got this master of guy here, he's the founder, I got to get him the fuck out of here. And did you feel that instantly? It was like, Dan, he went to all my team

Starting point is 00:47:00 and said, if you work with Mark at all, then you're a Mark's guy and you're gonna get fired. Wow! And if we wrote the book, I mean, the guys would tell you stories that he said, games that he played, it was crazy. I think you'd tell you stories that go on for hours. So I spent a year with Carl,

Starting point is 00:47:15 at the chairman level, let him be the CEO, and we had about 50 million cash on a balance sheet at the time. He blew through 40 of it nine months. Oh my God. How did he do it? He brought in consultants to tell him what to do. How we're gonna run our payroll systems?

Starting point is 00:47:30 How we're gonna change management? He had Bain come in and spend a ton of money with Bain. All the stuff already knew the answer's on. And what he did is he did what I call a tablecloth. He basically came in and hit the tablecloth underneath and trying to get all the silver and the place to stay on the table. And he took everyone and had them go through a process

Starting point is 00:47:48 if you remember of interviews and then filling out a test. And so he took guy like Vinny Farrell who was the number one grosser in our business for 10 straight years was top manager, top five every year of 400 guys. He said, his test show that he should be an operations manager. Oh, he really isn't a great sales person.

Starting point is 00:48:05 So we're going to move him to operations manager, but we'll protect him on his pay. So the op manager who is making 50 or 60 K, and he's making 130, we'll pay him 130 job manager. And then we'll take this op manager who is making 50 60 K, move him over here. And it just made absolutely no sense. There was a mass. I was it is of talent. Well, that's, I mean, it was the end, it was the end, being at the end.

Starting point is 00:48:26 Oh, all the, I mean, I can name off, you know, several people who were top managers for 24-fitness, who left during that era, I mean, a lot of them, and they're all millionaires now doing other shit because they're talented people, but they left during that period of time. That was a, it was insane insane. I felt like it was almost as if the sales process, because those of us who work in gyms, who run successful gyms,

Starting point is 00:48:52 understand that, I could have the best equipment in the world. I could have all the locations in the world. But at the end of the day, it's the people in there that are going to make that place successful. If you don't have a good sales team in there, if you don't have good structure in there and you don't have that process, good luck. And I think what happened during that period of time is they looked at it as, we've got all the locations, we've got all the equipment.

Starting point is 00:49:15 We'll just put the prices up on a board, people come in, they'll buy what they want and they'll leave and that's all that's gonna happen. They don't work out that way, at all. No, I mean, there's a lot of logic behind, you know, the theory that they had, which was, we're going to change the business. It's a successful and tripping early run business, but now we're going to professionalize it and change it into something that we can scale.

Starting point is 00:49:34 And in the fitness industry, that's yet to ever been done. And if you look at the history of the industry, any time you've taken the leader out of any organization and brought in somebody from the outside, 99.9% time it's failed. And there's a whole bunch of reasons for that. But we had 20 years of culture building and a great team that was rocking and setting the world on fire. And Ted came in and wasn't as focused.

Starting point is 00:49:57 He brought Carl in, wasn't as focused. Even though in the end, when I decided it was time for me to move on and go do other things, Ted told me, look, I probably hired the wrong guy, but I want to see if he can make it happen. And eventually they took Carl out because he couldn't, my opinion. They changed the whole culture of the company. And so it bifurcated into the competition. So what happened is 24 hour imploded

Starting point is 00:50:18 and lost its talent to guys like LA Fitness, Urban Active in the middle of the country and some of the East Coast players. And then eventually it came in over to us as we went and acquired crunch, and a lot of folks came into crunch. And then we built some other platforms, people started leaving, and a lot of the talent went out the door. And so, you know, there was this huge opportunity for the company at that time to become the market leader into perpetuity. And unfortunately, in the change of leadership we fumbled. It reminds me of almost kind of what happened

Starting point is 00:50:47 with the American auto industry when it was, they were just killing it, their designs were incredible, people were passionate, and then they brought in a bunch of bean counters, and these guys were more engineers than designers, the passion was lost, American auto industry took a dive, and that's kind of what it felt like. There's another question I wanna ask you

Starting point is 00:51:04 about the industry at large because you're I mean like I said I've referred to you many times as the godfather of the the gym industry when I was running these clubs in 99 or 2000 and all club membership was in all club meaning for the listeners Don't know it means you have access to all the different locations was like 45 bucks a month the initial enrollment when you at the end of the day was like $200, $300. A one club membership was $37 a month. Prices now are a lot cheaper now. And I feel like it started at 24 fitness later on

Starting point is 00:51:35 when they started just lowering prices and everybody had to follow suit. Am I accurate with that or what's going on? Yeah, so I'll give you, I mean, I don't run the company anymore, but I watch it, you know, I see it, I got friends there. But what's really interesting is that in the last couple of years that I was running it Brian Bohma would come in all the time and say hey look Costco keeps calling us

Starting point is 00:51:53 They want us to bring memberships in the Costco. I say what price point? Well, it has to be the lowest that we can possibly offer because that's their rule. Okay, I get that I know I know CEO Jeff I've met a bunch of times I don't think it makes sense. I don't think it makes sense I don't think we need to do it and Brian says well, they want to do like a two-year two-aid-eight membership That's crazy. We're charging 45 bucks a month. We can't do that. We're not doing it. So we'd say no Brian go I agree No, no, no, no, no. Well, when Carl got in there they opened up and launched right after I left the Costco membership Which was two-aid-eight and you can still go in a Costco today.

Starting point is 00:52:26 And what happened was, is the members would go in a Costco and go, wait, I'm paying 45 a month, but I can buy two years for 288. I'm out. Cancel and turn. Cancel and turn, which members are doing today. I was in Costco with my wife. I haven't been in Costco like in two years,

Starting point is 00:52:37 but she drugged me on the other day. And there's a huge palette of 24-hour fitness discounts. I'm like, well shit, why are members buying anything? Why don't they just go here? I'm advertising for Costco. And that sucked out a huge amount of the dues base which affected the business. But it became a drug because obviously they're bringing

Starting point is 00:52:55 a lot of cash from Costco. And Costco's happy and they're happy, but at the end of the day, the average price per member comes way down. And because 24-finished was the leader, everybody member comes way down. And because 24th Fitness was the leader, everybody else started following suit, and I feel like the big box gyms have lost a lot of quality.

Starting point is 00:53:10 As a result, now it's become the cheapest membership. Well, it's a notch up from Planet. So Planet came in and they did a phenomenal job at the low price 10 bucks. It was the entry up to $20 a month to get full service. And they started building a lot of product. They've got 1,500 clubs now. And so they're opening up next to the mid box, which is kind of call it 24

Starting point is 00:53:29 LA fitness, the two leaders there, YMCA's. And they were charging in the mid 40s. And so they're competing against 10 bucks. And they're like, well, if I can get down to 29 to 35, then many consumers might say, hey, for another 10 bucks or 15 bucks, I'll go to 24 hour because I get basketball pool bigger box, less traffic, less members. And so, they've brought the price down, trying to get after volume. There isn't volume anymore for the big box. So, I think that's a tough space for them to be. Now, I'm curious to hear your take, because I know we've been talking a lot about the big

Starting point is 00:53:57 box, but like, as CrossFit sort of emerged into the industry and what they did, just to kind of get into maybe the business of that and if you're very familiar with how they run their boxes and all that kind of stuff and what your take is. I think, I mean, like curves, CrossFit, there's been concepts that have even- Call-up that he just threw at you. Because we compare those two. They love that, by the way.

Starting point is 00:54:20 I mean, there's concepts that came out that hit a market that was underserved and CrossFit's done a phenomenal job at attacking the Millennial, let's call it or the I call it the 18 to 25 whose body can withstand that workout I can't do that work at my back of Jack in about an hour But take my 16 year old son, you know who can squat 425 at 16? I wasn't even doing a squat thing. Wow who can sit there and be at about 275 at 16 years old. And CrossFit's the ideal workout for that young person that's competitive, that loves camaraderie and group. And that's that kind of that dungeon workout. And it revolutionized a lot of training. And it built bodies now where I can see people that walk up to me and

Starting point is 00:55:01 shake my hand go, you're a CrossFit or right? Yeah. And you just see the body type that they've built from that powerlifting style of work out. But I think they did a phenomenal job opening up a new group of people. Yeah, I feel like a lot of the growth now is these smaller, more intimate type boxes. But I do want to ask you, because you left 24-finists,

Starting point is 00:55:21 and they forced you out, right? That's, I was gonna say, you've kept your cool this whole time talking about this whole process. I just can't imagine what's going, because you build something up. It's your baby. Worth it.

Starting point is 00:55:35 Yeah, from one club to at this time, I think 400 and something, it's now valued over a billion dollars. And some of the fuckers gonna come in and tell you that you're not doing things right or that there's a better way than this. What is going on inside of you? And then the point where you, I believe I got an email

Starting point is 00:55:51 and I think when this day happened, when you were escorted out of your own company. Yeah, and I wasn't true. It's not that happened. What was really interesting, this is a real story. No one's ever heard this before. So everything I'm telling you today is the first time anybody's heard it.

Starting point is 00:56:04 Oh, beautiful. My wife might not even heard something. Like I says everything I'm telling you today is the first time anybody's heard it Oh beautiful my wife might not even hurt something Like I say I'm always honest if people ask me I'll tell you no one's really gotten me on a podcast to ask me these questions So I'll tell you and like I said I could be your 20 hours so The true story is that I Go to Ted I said we got to have a meeting. I I said, we're gonna break our covenants with the banks. He's like, what the fuck are you talking about? I said, we're gonna break the covenants

Starting point is 00:56:28 with our banks, we've blown through the cash, we're not hitting our numbers, Carl's done a tablecloth and up the whole company, people are leaving, and people are freaking out, people are walking in my office. He just fired one of my top guys because somebody in his organization sold a muscle milk case to a GNC because they couldn't move it

Starting point is 00:56:47 from the club and it was about to expire. He literally took a guy, one of my top guys. I could give you the name, but I don't think this guy wants me to say it. He was a regional vice president, and one of his gyms, an OAM, took a case of muscle-milk that's going to expire. Went to the GNC. Can you buy this from me? You can sell it because I always got thrown away. He fired him over of muscle mouth. That's gonna expire. Went to a G&C. Can you buy this from me? So you can sell it because I always got throw it away. He fired him over that. Wow. That's like, smells like a smart business idea. Yeah, yeah.

Starting point is 00:57:11 And that created this wave with everybody freaking out because he wanted to set precedent that you follow the rules you're out of here. And that's just not the way the stringency works has to have more flex. But so I go to Ted, I said we gotta have a meme. We're gonna break covenants. So we go in, I fly in New York, Carl's in New York.

Starting point is 00:57:25 I explain what's going on, Carl's says I'm full of shit. I open up the books, Ted looks at numbers, he goes, master, I was fucking right. What the fuck's going on? He throws me out of the room, he and Carl have a big meeting. And then Carl just basically buckles down and comes to me, he was tailed to his legs

Starting point is 00:57:42 and says, hey, what are we gonna do to fix this? I said, well, you need to do this, this, this, and this here in the US. And I'll go out to Asia with Steve Kleinfelter and we'll crush our numbers out there and oversee that, because I was overseeing Asia, still Carl wasn't touching Asia.

Starting point is 00:57:54 So Steve Kleinfelter and I had a monster in Asia, blew out our numbers and Carl took the US and we just got over the hump. At that point, I came back into Ted and said, look, I can't stay with this guy. He's basically blowing out all my guys and they're all going to the competition, showing up at LA fitness. Chins call me up at LA fitness and he'll, I got another one of your senior guys showing up.

Starting point is 00:58:18 What should I do? Because we have good relationships. I said, look, if he wants to go there, pay him well, hire him. He's amazing. Nothing I could stop you. So I said to Ted, it doesn't make sense for me to stick around. He says, yeah, he says, do you want to stand the board for a couple more years and just kind of help us there? I'm like, I think I'm going to go do my own thing. So I went to Ted's test, okay, let's put a resignation

Starting point is 00:58:38 together. So I resigned. And I handed it to Ted. Ted sends cents off to Carl. And then Carl calls me up, and says, Hey buddy, I'm sorry to see you go. But you have a non-compete and I just wanna make sure you're gonna hear to that. I said, well, actually, Carl, I don't have a non-compete. Oh man. And I am not gonna hear to that. I'm gonna be your worst fucking nightmare.

Starting point is 00:58:57 You had a- And I thought you did. I thought you had a five year non-compete. No, not a non-compete. I mean, I did the crunch deal six months later. So Carl went off the deep end and he put a press release out. The next day, saying, Master of Left,

Starting point is 00:59:12 the company, and we wished him well, and then he went and put all the senior leaders in and said, he's outta here, and I'm in charge now. And he did a bunch of stupid shit that everybody got pissed about. And next he knows my phone starts ringing, and so Lorenzo Fertida calls me from the UFC and says, hey, I want to meet with you.

Starting point is 00:59:28 And as a Gordon calls from New York, he says, hey, we got this company crunch, it's not doing well. I want to meet with you. Carl stands all this business my way. And I'm like, what a fucking idiot. So, you know, there's a bunch of stuff in between there that I could go back and forth,

Starting point is 00:59:44 but Carl wanted to be the guy., hey, great, good for you. But, you know, I always find that if that's the case and he's a military guy, you always keep your enemies close. Yeah, exactly. He didn't keep his enemy close, you know, he did everything he could to get me out of there by telling people that, look, if you're a master of the guy, I'm gonna find a way to get you out of here

Starting point is 01:00:01 and you're not gonna work for me. Wow. And then he just, you he just slowly isolate everybody out. Anybody that had anything to do with me, he just found reasons to terminate everybody. And that's all the best talent. So they'll probably come your way. Yeah, I mean, Mike Fini was, you know,

Starting point is 01:00:12 probably he ran construction and equipment purchasing. He's probably the best in the industry. Everybody's saying right now, he's the godfather of that space, everything he does. And Mike slipped out of there, and I grabbed Mike an hour later. Mike came over He's so pissed off Jim Rolly who was pretty much Ryan the whole company at that time and Jim's a military guy

Starting point is 01:00:30 He's a marine Jim built our PT business from nothing, you know 80 million a year He took to 300 million a year. You guys phenomenal leader and is now my partner. He blew Jim out of there That was like three months after I left then he blew Steve Klein felt out of Asia And they they replaced Steve with another guy that took that business in two years from from at that time That was like three months after I left. Then he blew Steve Kleinfeld out of Asia. And they replaced Steve with another guy that took that business in two years from, from at that time we were doing 25 million

Starting point is 01:00:51 in profit in 24 locations in Asia and about six countries. They took it to bankruptcy in two years. Oh my goodness. Sickest thing I ever saw. I can't believe it. That's insane. I mean, I wrote a letter to Ted saying what the fuck?

Starting point is 01:01:02 But so many things they did made no sense to me. And all they did was do the same thing that everybody does. First thing you do is you point to the former leadership saying, oh, those guys fucked it up and I'm trying to fix it up. The second thing is, is that, I need more time because it's worse than I thought. And the third thing is, I fucked it up.

Starting point is 01:01:19 Yeah, you need a fuck out of here. So it just takes time. But he wasn't the right guy. And maybe where he is now, he's the, you know, he wasn't the right guy, and maybe where he is now, he's the right guy, but he wasn't the right guy when he came in, and he took 20 years of an amazing culture, an amazing team of people like you and blew everybody out of the water.

Starting point is 01:01:35 And those that stayed, God bless them, they held on and kept the company afloat, but it never amounted to much. No, never amounted. And it's time it got such, it's lunch eaten by Ella Finnesu saw the opportunity of blue right by him. I talk about the, I was able, so I watched all these talented people

Starting point is 01:01:52 that were all still remain my good friends that have gone off and done great things. And they all asked me, when are you leaving at it? When are you leaving? And I said, you know, I still like fitness. I had created a name for myself. They grandfathered me in on the pay.

Starting point is 01:02:04 And I'd ever, I never worked so little and made okay money and nobody touched me. And that was the only thing that cut me around there. And I remember thinking what made me finally leave was I like kind of reflected on the my last four years there and went like, this is not what I want. Like there are early years. I was so competitive and driven. And if you would ask me, I would have said, I wanted to be a VP in the company, and now it was all about how little could I do and still kick everybody's ass, and I gave so little.

Starting point is 01:02:31 I could give 60% and still outperform all my peers, and so they left me alone, and I just kind of cruised for four years, but it made me realize how important that is, like, if you just look at numbers, and that's all you see, you would see me as a guy who's Getting his job done and nobody did anything to me

Starting point is 01:02:47 But then you have no idea that there's a whole other level or gear that I could be giving you that Potentially for a club where I'm managing anywhere between 50 to $80,000 a month in PT That's a lot of revenue. That's a half a million dollars a year and me putting down an extra effort It gives you another 20% multiplied that by all the facilities that you have. Plus talented people tend to be, yes, money is always a motivator, but we're also driven by meaning, purpose, we're driven by our ambition,

Starting point is 01:03:16 and I'll tell you, Mark, I was a kid, I was a young kid, I was 18 as a fitness manager, 19 as a general manager. I was making 120 grand a year and I lived at my parents house in a drill vault wagon. I didn't know the concept of money. It really didn't care about it. Now why was I there 15, 16 hours a day, six, seven days a week?

Starting point is 01:03:36 It was the culture and I loved it and I enjoyed it. But as the culture starts to change, you lose that and you get the people who come in who punch in their cards. And my understanding of the gym business to change, you lose that and you get the people who come in who punch in their cards. And my understanding of the gym business is the difference between like really succeeding well and failing is a difference between having people who come in and punch in and punch out and the people who are really passionate.

Starting point is 01:03:56 That's really the big difference. And a lot of that was lost when the leadership lost. And it just always, it goes back to showing how important leadership is. And I think especially when it comes to gyms because back to showing how important leadership is and I think especially when it comes to gyms because, look, I can walk into gym and in five minutes I can feel the culture. Forget the equipment. We were, we went to Texas. We went to this gym, big text gym and it's this old school gym. I mean, there's rust on some of the equipment, some of the equipment. It's old school's chalk everywhere. We walk in that we felt the

Starting point is 01:04:23 culture right away. I'm like, this is a great, it was one of my favorite gyms I've ever walked into. And I think people who get in the fitness industry who don't come from that, don't understand that. And that tends to be, I think, a big problem. But I do wanna ask you, how satisfying is it now to compete against 24 fitness and to kick their ass with all the clubs that you have?

Starting point is 01:04:45 Yeah, good question. I really pay much attention to 24. We always, we always like Jim, Mike and I and you know, one of the great kids that we work with now is Brian Calgary. I don't know if you got to work with him, but Brian's a stud and you know, we get out there and we say, hey, do you feel 2040, you feel LA finished, do Do you feel who do you feel out there? A lot of times you just don't feel them So we're not sure what they're doing, but I look at it with a lot of pride I look at the leadership changes they've made as they took Carl out They brought a gallon who just stripped out all the costs and they sold it and then they brought in Mark Smith

Starting point is 01:05:20 I know really well Mark ran for fears. They took him out and now they've got a new guy in, came from the healthcare industry, Chris, who's trying to run it. I get a kick out of people that want to learn, don't want to learn. I think Chris got the job about a year, year and a half ago maybe, and he's trying to do some things inside. I think he sent me an email like,

Starting point is 01:05:38 hey, I just got the job, I heard a lot about you. I like to meet you. I say, I'm 10 minutes from your office. Call me anytime, I'll be happy to buy a lunch and kind of give you any history I can and never heard from again. So I look at people like that that don't want to learn and don't get it and they just want to come in and make their mark But I watch what he's doing right now and I'd have to give him a lot of coaching I think there's some things I don't agree with that he's head down the path of of Carl Liebert again So we'll see what happens

Starting point is 01:06:03 But there's some great people inside 24-hour have a lot of respect for and I hope they do well. It's a great brand. I tried to buy it back twice. They wouldn't sell to me. My price was bigger than anybody else's paid for it, but those guys were so good. I didn't know that you were gonna try and grab it again.

Starting point is 01:06:18 Yeah, it was so messy. I just felt like someone's gotta come fucking clean it up. And so I came in and said, look, I'll make you guys an offer. And I had the capital and I made a bigger offer than what Mark Smith bought it for. But I think they're so nervous to sell to me. They're afraid.

Starting point is 01:06:31 But at some point, maybe I'll come back. So I want to stay nice. But at the same time, we're building other companies. I'll be bigger than them. Crunch will be bigger than 25 hour by probably the end of next year. Let's talk about all the different brands now under your umbrella.

Starting point is 01:06:44 And some of them are so different from one another. I know you have like the, there's the hard candy, like mega Madonna gyms, you have crunch, there's UFC gyms, there's yoga. Yeah, the yoga works. So are you, what's the strategy now? Are you trying to hit different niches and markets? Because it feels like it's a little more niche.

Starting point is 01:07:03 Like the UFC gym. It's a little bit. Yeah, they seem more niche. Are you trying to go into the market that way or. Yeah, good question. So, when we started looking at the space, 24, we were just basically building that same product, you know, sports, super sport. And we started building a kind of, we called it active club, which was kind of what the planet club is like.

Starting point is 01:07:21 And we were messing around with building what any time built. I had a franchise concept, and then I had a small box concept. I had everything lined up, so we'd be kind of like the Marriott. We'd have 10 different pieces of product we could build anywhere. Now, I was on Carl's desk. He could have been anytime if you wanted to be,

Starting point is 01:07:36 because we had a 5,000 square foot franchise type concept. We had a curved style concept, we call Fit Light, which was 2,500 square feet circuit based. We had all that stuff built, but he canned all that stuff. Having said that, I thought, as we spent time talking, took Mike Jim, Brian, a bunch of us, and said, do we want to be in that middle or do you want to be at the bottom in the top? It felt like the equinoxes of the world and the crunch, which was a little bit more high-priced urban, was a way to stay competitive. And probably down that $10 space was pretty much

Starting point is 01:08:06 a space to be in. So Ben originally, I don't know if you know Ben, but Ben worked for us at 2-4 in corporate sales. And he was a direct reporter of mine for probably six, eight years, super, super smart guy. He left to go back home to KittyBunkport, Maine, where he was from, and he took a job with a planet and became their president, running planet. And then another kid by the name of Craig Peppanana, who I

Starting point is 01:08:30 recruited out of New York Health and Racket, was a phenomenal asset for us. He came in and became our first president running 24 hours. I stepped out so he could run day to day. And then he became my EVPS sales and marketing global, super smart guy. So he moved to Jacksonville. His mother-in-law was very ill and his wife and he wanted to get back. So he moved back there. I sold him a couple of our clubs and he based there. He and Ben became good friends.

Starting point is 01:08:57 And then when Ben left, planet, he called me and says, look, I want to start a low price concept. So he, Craig and I were getting together and Jim, Mike and I. And so we started a concept and then Crunch came calling. And so we merged into Crunch and created that low price concept, similar to what Planet does, but we added some twists to it.

Starting point is 01:09:17 We threw in Group X and personal training and nutrition and built a little bit bigger box. And so that company now started to franchise the last five, six years. We'll open 80 plus franchises this year, next year we'll do about 120. Wow. And we've also gone global.

Starting point is 01:09:34 We cut a deal with Cristiano Ronaldo in Spain, who's down Italy of course. Oh shit. So he's our partner in Europe. We've opened up in Australia. We're opening up in Canada and a bunch of other countries and this thing's doing fronely well. And Ben's led the franchise side.

Starting point is 01:09:49 Then we picked up, when we bought Crunch with Angela Gordon, we merged and did a deal with them. Keith Wurts was a COO. Now he's a CEO. He runs the own product, our urban product, which is in New York and Miami, LA and San Francisco. And so we have a great team. And a bunch of our ex-guys are in there operating.

Starting point is 01:10:07 They're doing phenomenal work. 24 hour guys that came over after they left 2-4. And so that business is growing like weed and doing great work. And then Lorenzo will call me. He was the first person I talked to and I flew in. And I've been a big UFC fan been going to the fights for years.

Starting point is 01:10:22 So he called you, that's awesome. He called me, he reached out and said, hey, so you left too far. We knew each other a little bit. He said, come see me. I want to do something together. So I flew into Vegas and we had a two hour meeting had a handshake on a 50-50 deal to open up these UFC gyms.

Starting point is 01:10:38 And we started building those. The first one being in Concord here in the Bay Area. And the concept was to show people that, you know, the fighters aren't all about bloody messes. It's about the discipline about learning and the respect around, you know, mixed martial arts. And so we built fitness facilities

Starting point is 01:10:52 that were aimed at families and kids. And for everybody. So is a gym with mixed martial arts program. So I don't know if you've been in them yet, but they're like, it's like going to a UFC fight. It's loud and bright. And it's got a lot of the crossfit. They're my favorite gym. And they're amazing, it's like going to a UFC fight. It's loud and bright and it's got a lot of the crossfit of the top players. They're my favorite, and they're amazing places

Starting point is 01:11:09 to train in because you can have everything. Everything, everything. It's Mike Fienes, the final job building those out. And we've taken the UFC culture and put inside these boxes. And then Adam Sedlak, I brought him in to run it. And he's done an amazing job building the company from one up to where we've got about 20 pieces of product We own and about another 150 that we've franchised and we start taking out global now, so we're in

Starting point is 01:11:31 20 22 countries right now that we've sold and and we have four big ones We're about to announce here the next six weeks and we're probably into a thousand units sold globally right now Wow, so that that business is blown up and we're having a lot of fun with it. So I looked at like, I wanted to have some fun and build some businesses with some of the team that we spent time with, the two, four that had left, and just picking people off of, call it, Fragency

Starting point is 01:11:58 and waivers, and whatever else. Like I look at the 24 hour waiver wire, so, okay. They let you guys go, okay, style, come on over, I got you. What were you making, 120, I'll give you 180, let's go, and you're happy, and off we go, give you some stock and give you a business unit. And then I was doing a lot of stuff when I built two four, I would get calls to come speak,

Starting point is 01:12:17 so I'd speak all over the country, then it'd be like, hey, I want to open some gyms, and so I started doing partnerships all over the world, and I was building quietly in about 30 countries, and the board was cool with it. As long as I wasn't spending a lot of time on it, so I'd invest, put teams in place, and I just have companies, more companies than people know about, keep very quiet about, but have built a bunch of businesses and probably now approached about 45 countries around the world and operating in a bunch right now.

Starting point is 01:12:42 That's awesome. What is it that drives you? Obviously it's not money, because I know you're at a point in your life where you probably don't need very much. So what is it that drives you to keep doing this, to keep expanding, to keep growing? Yes, a good question. People ask all the time, I think I'm very entreprenial.

Starting point is 01:12:58 So I love building things. So as an example, when everything's a story, and so I think it's all about relationship. So in Dallas, there was a club chain that was bugging the shit out of us. And it was owned by a guy named Johnny DeLavundane. And so I went out and saw Johnny still, I wanna buy your clubs

Starting point is 01:13:15 cause you guys keep undercutting our price and you keep flying our parking lots, you're driving us, fricking nuts, my guy's out here, hate you. I wanna buy your gym chains, he goes, well I'm not selling, I said, come on, it's gotta be some price you want. He says, well, tell you what, go dinner with me tonight.

Starting point is 01:13:28 We'll go drink it. If you can drink me out of the table, I'll let you buy my company. That is real, that is true story. That's a true story. John will tell you. So, Mike Apple was running that market out there for me. Mike's here in the bathroom.

Starting point is 01:13:40 Mike started a Hillsdale. Mike's my boy, so Mike was the big fan of the show. Mike's my best friend for a long time, and I still talked to him every once in a while. Mike's my boy so Michael is the the vice president for a long time and I still talked to my boss Mike he's over in Sunnyvale so Mike Michael Valdez this this because you if you know Mike the end of the story you'll love so I go out there we have dinner we got drinking Mike's with me I bury Johnny in about three hours shot after shot for shot because I'm Russian you ain't gonna fucking out drinking I bury his ass I I fire a minimum on my shoulder,

Starting point is 01:14:05 and I dump him in his car at the end of the night. He's got on this nice big old Rolex, and he's like, okay, fuck, I'm selling my company to you. Here's my Rolex, and I go, I don't want your fucking Rolex, and Apple goes, I'll take it. And to this day, he's never giving him back his Rolex. No, Apple has that Rolex. He still has it.

Starting point is 01:14:23 Oh, shit. So every time Johnny sees him, he gives him shit. So we buy the company from Johnny. I give him stock. So he makes a shit ton of money and we become friends. The Dallas Cowboys call him up and say, hey, he knows the Jones family. They said, we want to build a gym in our new complex.

Starting point is 01:14:39 We need some consulting advice. Johnny says, well, don't talk to me. You got to talk to Mark. He calls me. I fly out to Dallas. I have breakfast with Steven, Jerry, and Jerry Sr. And in two hours, we have a handshake on a partnership to build gyms and help develop their complex.

Starting point is 01:14:54 That's kind of what board the NFL club concept. The point being is that's all about relationships. And I love the relationship I have with Johnny. He's funnier than Shae's, the greatest guy. He's intrepid neural like I am, but he builds things. So he comes up with the concepts, like you've seen the Marshmallow gun, that's his. He came up with that idea.

Starting point is 01:15:13 You've seen like where it looks like someone hit a ball on a window of a car and it's like a sticker. Oh, it's all broken glass looking. That's his. Oh, he's done a ton of reality shows. And all kinds of things. He's just very intrepid neural like me, he's free spirit. We have a lot of fun together.

Starting point is 01:15:27 So relationships is what the world works about. We have a relationship, obviously you work together and so you bring me to the show because you know me and we spent time together. I haven't done anybody else's podcast. I've been asked, but I come because we know each other. And so that's how I think life is. And for me, I enjoy the ride. I enjoy building things. I enjoy seeing a great outcome. I think life is. And for me, I enjoy the ride. I enjoy building things.

Starting point is 01:15:45 I enjoy seeing a great outcome. I enjoy overcoming odds and fighting through everything. And there's so many fights and everything you've built. And if you pick countries, I could tell you stories for hours as we've gone into different countries around the world. It's some of them very difficult. Some of them very easy. On a relationship, no, on that note, I love that.

Starting point is 01:16:03 And I think that's so true. What are some of the strongest bonds that you've built and maybe some people that along the way that were relationships that you built, maybe even mentored you a little bit who've been some of the most impactful people for you? Yeah, great question. So one of the early partners I had was a guy

Starting point is 01:16:17 named Leonard Schlam. Leonard was a Harvard MBA in Finance and Canadian. And when I launched the, when I invested in that first club with Gene, Leonard worked for Gene as the CFO. And so he had Leonard come in and help us with the books and Leonard eventually invested with us. And Leonard and I became partners as we bought Gene out together. And so he was a great mentor. He taught me finance. He taught me how to be smart about finance, how to raise capital, how to do deals. And so he kind of gave me my groundwork training

Starting point is 01:16:46 for my first 10 years. And as he always says, after that, I kind of blew by him and moved into the big leagues as he moved back to Canada and did quite well his years have stocked that he had. But Leonard was phenomenal. And then different people along the way. Ray Wilson was amazing, because every day Ray would tell me,

Starting point is 01:17:03 you're gonna go bankrupt. You're gonna go bankrupt. I go, Ray, we're fine. We're throwing off a ton of cash. Yeah, but the world could change tomorrow. Yeah, he was always afraid. And he would beat on you to make sure you didn't make mistakes because he'd made so many mistakes in his life

Starting point is 01:17:15 in the early days and lost companies that he didn't want us to lose ours. And when we came through that big check at the end, he didn't say shit to me. He's like, good job, good job. So I was laugh at him, but Ray was great. And then people along the end, he didn't say shit to me. He's like, good job, good job. So I was laugh at him, but Ray was great. And then people along the way, I learned from everybody. Jim Rolly, he was very disciplined around the way that he operates.

Starting point is 01:17:32 Mike Feeney, who always has a tendency to say, no, you know, I'm a guy who always says, yes, and Mike likes to say no a lot. And then you got people around you that you meet along the way that, you know, you sit down with Ted Forsman, taught me a lot of things not to to do. I think you learn a lot of times from that. And Ted taught me some things to do. He was very good about some things. He hired people that I wouldn't hire that he thought were smart because you're moving so fast you make mistakes. So I have a tendency to take my time. I like to grow from within. I don't go outside too often. I do what I need to, but I'll take somebody like you and say, hey, let's spend five years

Starting point is 01:18:05 and get you to a point where you can hit your dreams. But at the same time, I can develop you and help you grow and be the best you can be. That's excellent. You come across as somebody who is super honest, not afraid to say what he's gonna do next because he's afraid of his competition, and you're also extremely experienced.

Starting point is 01:18:21 So you're the perfect person to ask this question. What do you think in terms of the future of this business? What do you think, because it's changed and shifted quite a bit in the 20 years I've been working in it. What do you see the big growth opportunities now? Yeah, great question. I think what you guys are doing, I think, getting into the, what I'll call the digital space

Starting point is 01:18:42 around podcasts and YouTube and education. I think there's a big opportunity. There's a few companies that are starting to scale and do well. Take a look at Peloton. Peloton built themselves as a media company now. They're not a bike company selling subscriptions anymore. They're a media company. They went from a billion to round a capital to six months later doing over a $4 billion

Starting point is 01:19:04 round a capital to six months later doing over a $4 billion around a capital. So I think that if you look at the space, it's moving to the home again. I think that a lot of folks are trying to figure out how I can produce and bring exercise into the home and content into the home, some of what Peloton's done. So there's a lot of people throughout that space.

Starting point is 01:19:20 There's VR and AI coming. So VR is gonna be very big, but for me, it gets me a little dizzy, so it's hard for me to do that. Maybe that'll change in time as they figured out, but if you use Oculus Glasses wherever you might be doing the goggles, it's hard for me to stay in that thing for 30 minutes to sweat and work out, but it's coming. So I think community's still important.

Starting point is 01:19:39 I still think that people need to get together to work out whether it's in a park or a park ride or a marathon or a gym. That's still going to be out there. But the millennials are buying in a different way. And then this Gen Z that they're calling now, which is those born after 96, as they start to evolve here and they're buying power, which is going to be far superior to the millennials. So it's more people born after 96. And you know, it's gonna be something approaching 18 and 20% of the population base.

Starting point is 01:20:06 And it's a very diverse group of people, very ethically diverse. And I think that that group is gonna shape the future of what we all become. Because the baby boomers led fitness, right? Kennedy's whole exercise program he built in the early 60s and the boomers coming through, that kind of evolved fitness in the 80s and 90s in 2000 and then every other group Gen Y, you know, call it millennial

Starting point is 01:20:30 Gen Z. That's kind of shaping it. But I do think that community will play a role. I do think that people are body health conscious like never before and I do think that the future is very bright because everyone's entering this space. I mean, the number of meetings I take, the number of people that come in with ideas and concepts is like triple what I've ever seen before. Agreed. And one of the biggest things that we saw

Starting point is 01:20:53 when we first started the podcast and one of our big goals, when we all sat down to start this business, we talked about trends that we saw and things that we could capitalize on and things that we wanted to communicate. And one of the big ones was in the fitness space, especially as a personal trainer,

Starting point is 01:21:10 that you had your fitness experts who were build muscle burn body fat, watch your macros, count your calories. And then you had this wellness space, which was about health and meditation and organic, and they didn't communicate. They didn't talk to each other. If you went to the supplements store and you bought a protein drink, finding an organic

Starting point is 01:21:28 protein drink was impossible. All of them looked like they were steroids because that's what they were trying. Make it look like so they could sell them. We talked about how those two industries are merging and are going to continue to merge. You're already starting to see, you're starting to see with the supplements that are being sold, the way people communicate things. We started this early on. we looked like three meat heads, but we talk a lot about wellness and health, and it was a bit of an experiment when we first started,

Starting point is 01:21:51 but it seems to be resonating, and we see more of it happening. Is that something you're seeing now on the gym side as well? Yeah, we were big and nutrition very early on, as you know, so we had Apex, which was Neil Spoust's company, which he now has.fit. Neil is the Godfather of what I call programming nutrition. He did nutrition houses at Golds, then he came into 24 hour. We built a $100 million business unit together, and now he's built a sponsor company at.fit. So we always found that nutrition is about education. So it wasn't about selling you nutraceuticals. That was great. That was a by-product. But it was about teaching you how to eat right, how to live your life right. And so now there's so much information coming out at you. My wife's a

Starting point is 01:22:31 voracious reader around health and nutrition. She's a big fitness nut. And so if you read the book, how not to die? I don't know if you've read that yet. It's about 500 pages. It basically gets you focused on plant-based diet. So that you're a little bit more off of meat and a lot of the products that are bad for your body. It teaches you a little bit, and educates you a little bit about that. About alkaline water. I don't know if you're doing alkaline water now, but that's like the new push to cleanse the body. The brand I like is generosity. It's very clean. I got the highest pH level, but super good alkaline water And then there's a lot of practice coming in to educate you more and more on a daily basis around how to eat better

Starting point is 01:23:09 How be each smarter a restaurant or Bring in organic and clean and you're trying to get more vegetables on your plate and less meat Less dairy too, so it depends on where you are in your life when you're 16 like my son He's invincible. It doesn't matter. He'll do anything, doesn't care from Taco Bell to, you know, who go to Chipotle twice a day. And then you've got, you know, people that are in their 30s that think differently and you get into your 50s of 60s, you think a little bit differently too.

Starting point is 01:23:37 Yeah, consumers seem much more educated nowadays as well. Way more and every day you learn more. It's moving very, very fast right now. What do you think from a marketing perspective, what you see happening with social media? I mean, I think that's completely changed since you've been in the space.

Starting point is 01:23:52 I've changed since I was in the space. I mean, I was in somebody who even had a Facebook. I remember I had my space for a little bit as a kid, and then really didn't care about social platforms when they first came out because all my friends were in real life. And then we started to see this. And I remember hearing, and I remember hearing people say, social platforms when they first came out because all my friends were in real life. And then we started to see this.

Starting point is 01:24:06 And I remember hearing it. I remember hearing people say, like, you got to be on Facebook and you got to be on these platforms because that's how business is going to be done in the future. And I remember, yeah, yeah, well, when I meet the first person that actually has built us a big business off of Facebook, then you'll sell me. And then that eventually did happen. And then later on, I got into this space and now I see what's happening with all these platforms. What do you think about that? Like from a marketing perspective, and are you starting to implement that into

Starting point is 01:24:32 your companies? Yeah, we have for years. So, you know, the social media digital space is what drives the business now. Most all the businesses are very focused there. But we still do a lot of the grassroots basic things that you need to do that others aren't willing to do by working in the local community to create You know awareness and touch people as much as you can but most of the budgets are spent around that So if you take a look at somebody like a 24 hour. I'd say 70% of theirs goes into digital and probably 30% goes into billboard. That's about all they do

Starting point is 01:25:01 So that's their focus That's a good point you make though. You don't want to forget about touching people in your community because I think CrossFit kind of prove that, right? Like people went there, their workouts are hard and all that stuff, but really it was the meaning. Well, that's what's fascinating about that to me when you say that. 70% if they're putting their focus on that, and when I see what they're doing, they don't know what the fuck they're doing. That was part of what made us kind of go this direction. I mean, anybody can just throw up Facebook ads, but Facebook ads, but part of what's made us very successful with Mindful Media was we brought that community feel of touching people in a virtual sense.

Starting point is 01:25:37 And we talk about this on the show a lot, like we're in this era right now, or this generation coming up that they're just searching likes or follows or more people, where we try and tell people like, you're better off having 10 people that you impact all 10 of their lives than having 1,000 people that just are here to look at your photos or whatever. And I feel like a lot of companies are,

Starting point is 01:26:00 they know that, you know, they need to be in the digital space and they know they need to be marketing on Facebook, but a lot of them really aren't doing it well impact. Yeah, it's a space you spend a lot of time on and it's really interesting So as an example I own a piece of an esports company and I don't know if you spend a lot of time around esports But it's where kids today spend most their time. I've got a 13 year old. I can't get them off of fortnight I mean ten hours a day in if you let them. When something's in. And my 10 year old is just as good.

Starting point is 01:26:28 He'll put in 68 hours of Fortnite. They love it. They play with their friends on headsets and they have camaraderie yelling at each other to pick up weapons and kill. So you get a kick out of it. But eSports is this monster business where hundreds of millions and probably billions

Starting point is 01:26:43 of kids around the world are playing. And we have an investment in our companies called Energy. business where hundreds of millions and probably billions of kids around the world are playing. And we have an investment in our companies called Energy. It's a big platform. We're in about 10 different games where we, it's like a professional sports team. We have kids that get paid on the payroll. They get a share of the prize money. And then we have sponsors that back it from Amazon to banks to everything you think

Starting point is 01:27:01 of. And there's some games, Overwatch, 100 million people playing, League of Legends, 500 million people playing, 500 million people playing. And that's all in this social media digital space where they communicate in a different way. And if you take a look at this Gen Z that's coming now,

Starting point is 01:27:20 the 96, the people born after 96, pretty much they're heavily wired and everything is predicated on visual imagery through Instagram and Facebook and everything that they see in life is around. I love you, you look beautiful, great job. Very positive environment. And so the world is, it's changing and evolving.

Starting point is 01:27:39 And you take my 16 year old, he was very heavy into that, but now he's like trying to get a social footprint down to a point where you don't even see him. So they kind of swing it out. It's kind of changing there too, a little bit. Was they get a little bit older? They get a little bit more worried about the visibility

Starting point is 01:27:55 that they have in front of all their peers and friends. Oh, that's cool to see your kid go through that then, because they are growing up in a different time right now. I'm told they're different. We're, they're social online, but then some of these kids they get in person and they've lost a lot of their social skills because they didn't have to develop them at a young age. So to see that you have a teenager that's kind of gone through that and is now cares about

Starting point is 01:28:13 getting out in front of people is cool. Great book for that is Igin. I just read that not that long ago and it talks all about that generation, Brakesdown, all kinds of great statistics. Something else I wanted to ask you about when I got you was the process that you went through when you almost bought the Sacramento Kings. Who I did buy it. Oh, you did.

Starting point is 01:28:31 So I thought you didn't. I thought you were gonna buy them and then it didn't happen. Yeah, so it really had been on the warriors and I lost that to Joe Lakeup. Okay, that's right. So we had a group that we bid and we got down to the finals and Joe ended up,

Starting point is 01:28:44 we blinked at the end, didn't wanna go to that number and Joe went and got it So he's done phenomenal job ever since and then Sacramento came up and so originally I was partnered with Ron Berkel to buy the team and The Vecca on a dv and then Ron Had a had a bump out because he had a conflict with the NBA He had a relatively immediate had a group inside there that represents some NBA athletes. And there's a bylaw that you can't do that. So Ron couldn't get rid of that. So we had to step out. So Vivek ended up taking a lead role and I invest alongside him and a bunch of other guys when we bought

Starting point is 01:29:19 Sacramento Kings. How's that? Do you go to a lot of games right now? Yeah. Oh god. Yeah. I'm a big basketball fan, so I want to come out there and come bugging. Every time. Let me know. I got tickets. No worries. And I can do. But yeah, we have a very young team. We had the two pick in the draft this year. So we took a bag Lee who's fantastic. And we have a almost a collegiate team, very young team with a couple good pros, Zach Randolph and others, but we'll be young this year. Yeah, yeah, you are. Well, this's what I saw. That's our very good. Well, this is, I have to say, of all the guests that we've had on the show, we've had

Starting point is 01:29:48 some guests with huge footprints and big voices and I've learned a lot from every single person. I was most excited about having you on because my early years in the company that you created really started the forging process to make me who I am. And I know my two hosts can echo the same thing. We called 24-Fitness School. That was our school. I was only there for a few years,

Starting point is 01:30:11 but later on I opened and owned my own wellness facility and then eventually now we started this. I didn't know these guys at 20. We never had met until afterwards, but a lot of the things that we talk about, what we learned, the systems that we put in place, we learned from the culture that you had originally created. So I wanna thank you for that.

Starting point is 01:30:30 And it's really surreal having you, Sidious, like full circle. Yeah, I appreciate it. You guys have done a phenomenal job. And I think we always felt that we were training ground to teach, and that's why we had you. We were gonna teach the best we could, and we'd find out what you wanted to learn

Starting point is 01:30:44 and try and give back as best we could because we knew that we would spring a lot of bright people into interpreting opportunities and you guys have done that. So we're really proud of what you've done and happy to see it and we'll watch you continue to grow and when you dominate the podcast sphere and YouTube and everything else we'll be able to say that we learned from you. That's right. I learned from you. Thank you. Thanks for having me. Appreciate it. You bet.

Starting point is 01:31:07 Pleasure. Thank you for listening to Mind Pump. If your goal is to build and shape your body, dramatically improve your health and energy, and maximize your overall performance, check out our discounted RGB Superbumble at Mind Pump Media dot com. The RGB Superbumble includes maps and a ballad, maps performance and maps aesthetic. Nine months of phased, expert exercise programming designed by Sal Adam and Justin to systematically transform the way your body looks, feels and performs.

Starting point is 01:31:37 With detailed workout nutrients and over 200 videos, the RGB Superbumble is like having Sal Adam and Justin as your own personal trainers, but at a fraction of the price. The RGB Superbundle has a 430-day money-back guarantee, and you can get it now plus other valuable free resources at MindPumpMedia.com. If you enjoy this show, please share the love by leaving us a five-star rating and review on iTunes and by introducing MindP pump to your friends and family. We thank you for your support and until next time, this is Mind Pump!

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