Is Your Building Lease A Ticking Time Bomb?
Most of us need them, but shortsightedness at lease signing can be a killer.
I’m obsessed with finding opportunities in niches.
Months before I announced my retirement these two thoughts consumed me:
“What the hell will I do to fill the void of Urban MVMNT?”
“How can I use this opportunity to further my mission of helping microgym owners?”
That’s where the idea for The Gym Real Estate Company came from.
So I started down the path of becoming a licensed commercial real estate broker, created a nationwide network, and now I’ll be able to lean into this company’s mission of helping microgym owners lease and buy buildings.
If you’re in need of a lease, it’s time to re-negotiate your old one, or you want to create a plan and get coached through the buying process - let’s chat.
Today’s Rundown
✔️ Digital strength gaming is showing up strong in the UK
✔️ Guerilla marketing ideas to create inspiration
✔️ Don’t become a cautionary tale to a shitty lease
Strength Training? Nah, Bro. Strength Gaming.
Will they see the same success as E-sports?
If your clients find working out tedious or unenjoyable, you may be in luck.
The team behind Europe's number one fitness app, Freeletics has announced the launch of a new "strength gaming" experience that taps into the rising demand for gamified and entertainment-led workouts.
"STÆDIUM" combines strength training with a unique gaming experience creating what the brand claims is a new fitness category, hoping to fill a gap for consumers who currently find working dreadsome.
As the name suggests, STÆDIUM aims to provide a sports arena-like environment for users as they complete full-body exercises with other users in real-time or asynchronously.
The system includes three main components:
The console, which houses the software that powers the system.
Dumbbells, which can be adjusted between two and 24kg in seconds and are continuously scanned by the camera to identify their current weight and velocity.
The base, which contains an integrated, removable workout bench and also functions as a home for all STÆDIUM equipment.
Beyond hardware, STÆDIUM's monthly subscription features workout sessions, performance tracking, and challenges.
Game on.
MY TAKE
Listen, if you're anything like me, you're tired of all the digital news in the fitness industry. It becomes almost repetitive and hard to evaluate in the infancy stage.
But just for a second, zoom out and let the history of a similar industry provide some insight that may be representative of the future of digital fitness - and that's Esports.
If you grew up as I did with a Nintendo, Sega, PlayStation, and perhaps you even upgraded to an Xbox in college, then you are familiar with the evolution of Esports.
You used to play by yourself. Then you played with other guys in your dorm. Now, you can play with anyone in the world.
Esports is currently a $1.6B industry with a division of top professional gamers generating more than $500,000 a month...playing video games.
Let that sink in.
And the Esports evolution took less than 20 years to develop its current market speed.
So now, with that in mind, let's look at gaming through the guise of strength training.
Gamification is Lucrative AF
In previous WTF Weekly issues, I've discussed using wearables as a gamification tactic within your microgym.
But what we need to remember is that gamification has been happening since 2000 or earlier.
CrossFit gyms have been using analog whiteboards to track your data and manifest friendly competition.
Then Flywheel, RIP, showed up with a live scoreboard with your 'Power Score,' a mix between your bike's RPM and torque setting.
And we all know of Orangetheory's impressive heart rate leaderboards displayed on giant screens within the studio.
So gamification has been here; it's just going to keep evolving and becoming more sophisticated.
And with Peloton finally announcing their strength gaming service, fitness gamification will probably go through the beta phase faster than we think.
Wait for the Whitelabel Services
Here's my prediction.
Eventually, the equipment you use in your microgym will become smarter.
Dumbbells and barbells will be able to track reps and load.
Your rowers, bikes, and ski ergs will be interwoven into large leaderboard screens so you can keep pace with or try to beat the rest of the class.
And your Whoop, Apple Watch or Garmin will soon be able to recognize movements like burpees, box jumps, lunges, etc.
So if you believe that futuristic narrative, that means you also have to believe this: It will all be available at home as well.
Like it is now, though, people will prefer the IRL model, which is where a Whitelabel service gets interesting.
Imagine a company that creates a superb digitally connected service that you can pay for, slap your brand on, and customize the workouts to install your unique belief in fitness within.
Then offer it to everyone who doesn't want to be an IRL member or members who prefer IRL but want an at-home option for when life happens, and they can't make it into your facility.
Can you see it?
While you may feel that this tech is far away, I'd argue that the next ten years will require microgym owners and those looking to get into the industry to stay alert to these advances and open-minded to what the future can bring.
Because remember, your entire life and how you interact with everything have evolved over the past 20 years.
So don't get caught being the microgym owner who thinks the fitness industry is exempt from digital development. If you are reading this and thinking to yourself, I am going to keep providing the down-and-dirty tech-less experience I had for the last ten years, then I would argue that proves more about your ignorance than it does boasting your loyalty to how things were.
Guerilla Marketing Done Right
Be where your prospects are…
When you think of fitness, you probably don't think of fast food.
However, Rumble Boxing teamed up with Umami Burgers creating a delicious guerilla marketing campaign - the Rumble Knockout Burger.
The tasty partnership will include a free Rumble Boxing class card with the purchase of a Rumble Knockout Burger, good through the end of 2021. The limited-edition burger is presented in a Rumble + Umami custom-designed box with a colorful, pop art comic-book aesthetic, embodying the Rumble brand.
The partnership comes on the heels of Rumbles' recent expansion announcement and further expands brand visibility and attracts new prospects.
MY TAKE
As I have shared in previous content, while having a digital marketing plan is crucial for your microgym business, there are plenty of options to get the word out about your brand that are cost-effective and warm up your target audience far more effectively.
The Rumble + Umami Burger collab is one of many excellent guerilla marketing examples.
Here are a handful of additional guerilla marketing and advertising concepts from gyms to give you some inspiration and get your creative juices flowing.
The Calorie Receipts
Intending to attract new members with a very low budget, Fitness First, in Berlin, Germany, identified that people go to the gym to burn calories, so they targeted prospects where they consume calories - in restaurants. They coordinated with restaurants near Fitness First gyms and altered the consumer receipts to not only show the price of their meal but also show all the consumed calories of every dish and how many hours of workout in the gym are necessary to lose them again, with a coupon for a free training session at a Fitness First facility. More than 300 people traded their vouchers for a free training session within the first month, with more than 30% becoming Fitness First members.
We Interrupt Your Regularly Scheduled Day
As a society, we regularly overestimate our fitness and underestimate just how unhealthy our lifestyles are. From Desk jobs to escalators, our lives are more sedentary and convenience-based than we like to admit. Gold's Gym's guerilla marketing campaign targeted locations people see on a typical day and, with bold statements and branding, sought to shake people out of complacency and inspire them to take action to be more healthy by joining a gym.
Similarly, a Nike marketing campaign went one step further, barricading escalators with their simple but icon Nike swoosh.
Hit Too Close to Home?
The cheeky, humor-forward ads below are designed to confront viewers with their own unhealthiness and implore them to take action for their health.
When you are so out-of-shape you tip the billboard scale, you know it is time to visit Silberman's Fitness Center.
If you look down, and can't see past your pot-belly, check out the new gym in town, Oxygo.
With WeightWatchers, you may start your journey large, but you will end your journey slimmer.
Are Leases The Achilles Heel For Your Microgym?
With commercial lease rates + development at all-time highs, how do you protect your business?
A commercial building lease is a love/hate relationship.
When you were just dreaming of your business, you fantasized about a brick-and-mortar building that you could call your own to help you create an awe-inspiring company.
You envisioned what it would look like and how it would feel to finally sign a lease and have keys to your own microgym.
But then there's that whole rent thing.
See, for most businesses starting, rent will be their largest fixed expense. Of course, as your business matures and develops staff, I'd hope that payroll dwarfs the rent at some point, but for this article, let's assume that rent is still one of the most considerable monthly obligations on your expense report.
Well, I don't know if anyone told you, but commercial real estate (CRE) lease rates are continuing to climb to historical highs, and development, new construction, and gentrification are booming in almost every Tier 1 and Tier 2 city in the US.
And the way I see it, the microgym owner who does not have a 20-year lease or purchase strategy is fucked.
The Numbers
Here's a basic overview as to how commercial leases work.
If they are confident in their abilities, an owner will sign an initial 5-7 year lease.
When starting, those more timid owners might opt for a 3-year lease- a huge mistake that I'll point out later.
You can then negotiate renewable options into your lease, which means that you have the right to renew the lease for another predetermined length of time at the end of your base lease.
For example, a lease may have a five-year base with (2) three-year renewable options. Meaning, after the initial five years, the tenant can renew the lease for three years and then renew it again for three more years - giving them 11 years in total.
However, once the base lease is complete and you wish to exercise your renewal options, you will often find yourself renegotiating rent to keep up with fair market values.
This is where shit can go sideways.
Appreciation, Inflation, and Comps
In the time that has passed since you signed your original lease, the odds are that the dirt in that zip code has appreciated at a substantial rate, other CRE developers are snatching up adjacent parcels of land, and economic inflation is undoubtedly a factor.
The larger development firms can afford to buy buildings for cheap and lease them at premium rates. As a result, they attract a slew of new businesses to turn less desirable areas into the latest trendy neighborhood.
This creates 'comps,' comparable lease rates, for a building like the one you lease way above what you signed for just a few years ago.
Now your landlord will conduct his own price increase since you are currently paying below fair market value (FMV) rent compared to other similar buildings in the area. And rightfully so, your landlord is a business owner, just like you, looking out for their best interests too.
Too Many Leasees Become Cautionary Tales
While it doesn't make headlines too often, you can dig and find stories about how many big box stores are millions of dollars in rent delinquency due to COVID - or how smaller players spend 13 years building their business only to have the landlord opt to renew their lease.
Every year, I get on a call with no less than 12 unique microgym owners who are being forced out of their building - either due to a shitty lease they ignorantly signed or because the new FMV rent is more than their business can afford.
These owners found an inexpensive spot in a less desirable part of town, put years of work growing the business into something special, and now due to the nature of basic economics, they have to relocate to another, less desirable part of town to find a rental rate they can afford and start all over again.
Is this a problem? Yes.
But it's a problem that is entirely avoidable.
Bet On Yourself
If you've decided to open a business, you must realize you've made one of the most challenging + lowest probability of success decisions possible.
But if you're going for it, fucking go for it!
Stop signing short-term 1-3 year leases when you start off. Instead, bet on yourself and execute an initial 5, 7, or even ten-year lease.
This will give you a longer runway of time where you know exactly what your rent will be and will insulate you from increased FMV, at least for a period of time.
Stop "Growing Into Your Building."
Many young owners rent the smallest space with the cheapest rent and tell themselves, "I'll grow into a bigger building as the business grows!"
Cut that shit out.
You'll spend your initial lease term building a customer base and revenue, only to have to relocate if you can't afford the next lease renewal.
And then, what happens if the inventory of available buildings isn't there? If every other building that would work for your business is 2x the price of your current lease, what now?
Instead, what if you had planned long term, been patient, and signed the perfect-sized building that allowed you to stay put for the foreseeable future?
Yes, I know..." but, Stu, I couldn't afford that building back then."
Well, guess what, another six months of savings or an additional $80,000 in loans or funding might have been a saving grace, but now you're out scrambling to find a new location and hoping your current clients ride-or-die.
Your lack of patience and planning could now be your demise.
It's a Simple Education Issue
As owners, we must take full responsibility for our wins and losses.
If you signed a shit lease or didn't have the foresight to get locked in for the long game, only you're to blame.
However, the reason this cautionary tale is so common is simply that most microgym owners have not been educated on the topic.
We are too busy thinking of the thousand other hats we wear to be successful that we don't stop to think about this 20-page piece of paper we are signing and its long-term impact on our business.
If only a CRE firm niched into the fitness industry and had every ambition to help educate owners on proper strategies and coach them through the leasing and building purchase process 🧐.
I may have retired from one thing, but I'll never stop working to help microgym owners.
