Can you run a business where you have no background on it? How do you scale that business? In this episode, Jon Smith shares his journey of how one entrepreneur is scaling a multi-unit Club Pilates Empire with zero background in Pilates. The large demographic that Club Pilates serve is a huge factor in their growth. The more people with experience you get involved in your business can be your determiner in success. Jon mentions for general managers to be successful, they must have the sales arm and the ability to manage a process and people. Dive in for all of these and more!
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I am joined by a multi-unit franchise Owner of Club Pilates, Jon Smith, who I’ve gotten to know a little bit over the years. We reconnected, and I was like, “Tell your story on the show.” He was like, “No.” I was like, “You’ve got a great story. Come on.” I convinced him to come on, and here we are. Jon, welcome.
Thanks for having me, Dru.
I’m looking forward to getting to know you and your story a little bit better. You’re doing some cool things with Club Pilates. Club Pilates is one of those franchises where people outside looking in are like, “Pilates, what? I don’t get it,” but there’s a story behind it. Let’s start with you. How did you find your way into Club Pilates and this whole franchising thing?
I’ve been self-employed for over twenty years with a family business that was in sales. I owned a sales territory that sold cap and gowns, announcements, and diploma covers to high schools in the State of Georgia. I was looking for something else mainly because I came to find out that if I didn’t show up for work, then I wasn’t going to make any money. It’s relationship-oriented so it’s hard to scale yourself out of that business.
I was looking at franchising. I was on the beach with one of my partners in 2016. He said, “Have you ever looked at franchising?” I was like, “Yes. I don’t know what to pick. There’s a lot out there.” One of his buddies’ acquaintances was in franchising. We ended up speaking to a consultant like yourself and came down to a couple of different options. We chose Club Pilates. We flew out to California in August of that same year and decided to buy six units in the Raleigh Triangle market.
Were you living in Raleigh at that time?
No. I was in Georgia. I decided to move my family to Raleigh because I knew in my heart that if I was still involved with my family business and hit that first bump of the road, which you always do, I would revert back to my safety net. I made the choice to go all-in and figure it out. That’s what we did.
You moved the family and kiddos from Georgia to Raleigh and started your Club Pilates venture. In 2016, Club Pilates has been somewhat of a “unicorn franchise” in terms of what happened with growth and everything. What was it about Club Pilates that drew you in?
There were a few things that stood out. I had never done Pilates, but all three of our partners at the time did a workout together. All had a successful workout even though we were all in shapes and sizes. That stood out. It was a quality workout. I liked the recurring revenue aspect of the business and the predictive cashflow. The large demographic that we serve was a huge plus. There’s a broad range of people that can have successful workouts in Pilates.
It was disrupting the Pilates industry because previously, it was always about buying a package and using a package. Maybe you’d buy a ten-pack or what have you. There was no one doing this recurring revenue model of membership-type boutique fitness at the time. You had Orange Theory Fitness out there and a few others, but nobody in the Pilates realm was doing this membership model. We love them. Lastly, Anthony Geisler and Shaun Grove were the leaders at the time. I bought into their vision. They’ve done it before with LA Boxing and had a record of being successful.
That was before Xponential.
That’s right. Club Pilates was the only brand they owned at the time. They had 89 sold. When we bought in, there were about 35 to 40 open. We were early adopters. Some of the validations were folks that had been part of Club Pilates before Anthony bought them. They were a little bit leery of the new concept or new model and processes, but they were having success. Everyone we talked to was pretty pleased with the results. We decided to go ahead and buy the entire Raleigh market to protect our future growth.
You were early in the 2.0 Geisler model with Club Pilates.
That’s exactly right. It has even gotten better over the time that we’ve been in. They’ve fine-tuned it. As new owners come in, they were setting new records and doing well.
That’s a fascinating case study in franchising to look at Club Pilates and the growth it has had. Club Pilates was the first brand under Anthony Geisler, which is now Xponential Fitness, a publicly-traded company portfolio. You have been around for the ride. What has that ride been like? Has it been positive as the company becomes a publicly-traded company or has it been a little different?
The brand awareness was off the charts as far as lead flow. What we’re spending per lead is getting improved as more and more people are aware. That’s very much a positive thing about going public. The franchisor has been able to hire extremely good people to help them run the business. That has been exciting. It gives you more franchisees to talk to. I talked to all the different types of brands and owners at these conferences. We’re able to get to know a lot of different people and get ideas from other brands. It’s a group thing. A lot of positives come with it.
Especially with the quality of some of the operators that got involved with Club Pilates. A lot of franchise owners and business owners but also, there were some experienced multi-unit operators that got involved too. There were a lot of liberty tax connections.
What’s your current operation look like now?
We’re up to 11 open studios, and then we have 12 and 13 that are in the pipeline for 2023. We have the ability to get to 17. We continued to buy up some dirt as it became available to help expand. There’s a lot of growth that has taken place over the last year and a half.
Good for you. That’s awesome. You guys started in Raleigh. How many do you have open in Raleigh?
We had 6 open in Raleigh. From September 2021 until September 2022, we went from 6 to 11. There are 9 in Raleigh and we acquired a studio in Georgia and we are expanding in Georgia.
You almost doubled quickly.
We did. From 6 to 11 in 12 months.
What was that like?
It was fun. I learned a lot. When you spend your early 20s and 30s trying to be relevant in your workplace, and for the last 3 or 4 years, I’ve been trying to figure out how to be irrelevant. I’m not making the decisions. You hire a great team and let them run it. Previously, I’m a basketball coach. I’m a pretty good recruiter and see talent in the way it fits into the team. It’s how I approach setting up our team. I’ve always said that it’s easier to guide a wild stallion than to move a dead horse. I look for wild stallions and set up parameters around what decisions they can and cannot make, and let them go. We’ve been fortunate with our team. They made it happen. It wasn’t me. It was the team.
You had to be comfortable in finding talent. You can’t teach talent. It’s putting the structure in place and giving a lot of responsibility or delegating a pretty significant amount of responsibility to let the stallions run within the guardrails. Sometimes it’s not easy giving a significant amount of responsibility to somebody when it’s your own business and your own money on the line.
It’s not, but it’s also freeing. If you understand your weaknesses, it’s easy to give something up that you’re not strong in. I’ve learned a lot about myself over the years. I can delegate my weaknesses well which are a lot, so I delegate a lot.
What you’re doing is impressive. Was there anything that shifted in your mindset or how you think about your business that got you into trying to make yourself irrelevant-focused and building a good team of people and whatnot? Was it something that you were always trying to do?
I’ve always made a lot of decisions with gut instinct. I’ve realized that the more people you can get involved in that have had an experience in making those same types of decisions, hearing from them, and learning from other franchisees or other people in the franchising community have helped me focus on my why and keep that in front of me. The most important thing to me is my family and spending time with my three daughters. I like to mentor in the community and have time to do stuff that I like to do. Setting up a schedule where I can make those things happen has always been my goal. I’m getting to that point now where I can do the things I want to do.
You can’t create more time unless you build a team of people. It sounds like you’re very intentional about the lifestyle that you want to have as a business owner as well.
We’ve grown more organically from the ground up. It has worked out that way. We’ve acquired one studio and the rest have been from the ground up. We’ve leaned into the franchisor for their support and training of our GMs. They have good quality programs and processes in place that help us be successful. It wasn’t all on us. We hired a great team, but I made a decision to lean into the franchisor to get them to help us scale. That’s what they’re there for.
It sounds like Shaun and the team at Club Pilates before Xponential did a good job of evolving themselves as a corporate support resource for the franchisees as Club Pilates started to hit the hockey stick exponential growth. Was the hockey stick growth showing when you were getting involved or was it good growth, but not the “Holy moly, here we go?”
They grew fast and the great thing about it was people were opening studios. The biggest thing you could see is they were selling a lot of territories, but people were opening and you were having success after success. People are improving upon the presell memberships and setting new records. It was as an exciting time to be a part of it.
We opened one in 2017, one in 2018, and three in 2019 right before the pandemic. North Carolina was shut down for seven months. The franchisor supported us through that with a lot of help and guidance. Every week Anthony was on a call, showing up and giving us great support. When we came out from COVID, we were ready to rock and roll.
You doubled relatively quickly. How has your team and the organization that you’ve built to manage your multi-unit operation evolved as you have grown? What does that look like if you don’t mind me asking?
We have a regional manager that handles both Georgia and North Carolina. I have area managers that handle two studios. We give the ability for managers to grow from 1 to 2. We also have general managers at each location. It’s the support. As I’ve told you before, we lean them to the franchisor for training. As for opening new studios, it’s almost like another accountability arm. If you have a good relationship with your franchisor, they’re giving you feedback about general managers and how things are going. It helps me have a set of eyes as well. I use them for positions that I would probably have to hire, especially when opening a new studio.
That’s great that you have faith in the feedback and leaning into them to be able to get a little bit of leverage there off of your P&L and resources. As it relates to the managers of your locations, I’ve had a bunch of multi-unit franchisees on the show. We’ve talked about you can have the best location in the world and all the advertising cranking in, but if you don’t have a good manager, things are going to be a little difficult. What are some of the things that you look for in the GMs of your locations as you continue to grow?
We realized early on with the multiple-product model that it was very much a sales-oriented role. The general manager has to want to hit a number and be motivated by hitting a sales goal. Also, taking care of people or a people person that smiles and interacts. It’s the simple things, but if they’ve never been in a sales role and they only manage people before, they might not be able to fit in. We found that if they have the sales arm and the ability to manage a process and people, they can be successful. It’s a fairly simple model if you follow the playbook. That’s what we try to do.
Are you recruiting from within the fitness and health and wellness industry or are you open to going outside of it?
We’ve been able to land a few recruits from outside of Club Pilates that have worked at other boutiques, fitness, or even some big box gyms that have had sales training. They’ve been pleased with our culture and fit in well with our processes.
They have the experience background and then you look for attitude and mindset.
A lot of them have corporate training from some of the big boys. They come in and have that behind them and are able to use that to help us.
How do you guys stack up with the number of locations that you have in terms of the size and scope of the multi-unit operation within the Club Pilates family? Are you one of the bigger ones or where do you land?
I don’t know necessarily. We’re probably one of the bigger ones, but the comparison is the thief of joy. There are some bigger ones out there. We’re probably in the top ten now. Club Pilates is growing overseas and there are some folks in Australia that are building out. There are some in the UK about to get developed.
As you’ve been on your journey in franchising, you were a consultant at one point, which is where we got to know each other. I’m trying to recruit you back, and you’ve got too good of a lifestyle to let me do that, which I respect. Have you ever had that little temptation where you’re like, “I hear good things about this other franchise. Maybe I’ll get involved there,” compared to doubling down as you have done and just focusing on the brand that you’ve gotten to know so well?
There’s always this thought of diversifying because there’s not much dirt left in Club Pilates unless you’re going to go out and acquire existing studios that are available. It’s not something we want to do right now. We’re happy with our depth and leverage at this point. I’m always watching and seeing what’s out there that might be a good fit, but it’s also a risk. It took us six years to get to this point. Doing it all over again with another brand is not as easy as it sounds.
There’s a lot of wisdom in you got a good thing going and you’re avoiding the temptation of the things you hear about these emerging brands that are coming up. You’re a little spoiled too.
Early on it was hard to find real estate and you have to tell your story about Club Pilates and who we were, but now people are calling us. It’s a lot different. We’re getting good deals. We have people who are excited about the brand. Commercial real estate is open to boutique fitness. For a long time, they weren’t. Now you’ll see rows of fitness. One of our plazas has three Xponential brands.
Xponential Fitness owns ten concepts now. They are a behemoth company. They got Stretchlab, Club Pilates, CycleBar, and a bunch of others. They’ve done a good job of leveraging their collective influence in the world of commercial real estate to get on the radars of a lot of these REITs and in some of these bigger landlords and get access to some of the real estate that other franchise companies might not.
We were a little scared at first. We were the first ones to deposit. We had a little bit of this, “We don’t want anything else,” but the reality is we had a Stretchlab come right next door to us and it helped both of our businesses.
Why is that?
I don’t know but it did. It was brand awareness. The Stretchlab user is a little different. They’re probably 50-50 male and female. We’re 90% female. The husbands are going to get stretched while their wife is at the Pilates spot. It’s interesting.
You have been through the gauntlet, the pandemic, and some other stuff as you guys have scaled. We make this stuff sound pretty easy, but there’s a lot of work and a lot of sweat equity that goes into this. If there are some aspiring multi-unit franchisees and current multi-unit franchisees looking to scale, and even franchise companies that are bringing on multi-unit franchisees, what is some of the advice as you’ve gone through your growth and your journey? What are some of the lessons learned for people that are looking to scale in a big way? Are there things that stand out to you as you look back and reflect like, “I wish we have done this a little bit differently or know this?”
In 2021, one of my partners and I had a chance to get out, but we didn’t. We decided to stay. We brought in a new partner that provided growth capital, as well as some strategic banking relationships, which was huge for us at the time. We did not have those in the past. That helped us grow. It’s staying ahead of the people. For example, the price of instructors, you can’t go around and hire them off the street. You got to develop your team.
We doubled down on our training and getting our pipeline and team, and make sure we could handle the growth. Specifically in Raleigh and opening those additional three studios, you have to have instructors to open them. We spent a lot of money on training new instructors. Now, we’re doing the same thing in Georgia. It’s a program that the corporate runs. It’s up to us to execute it to get people in the pipeline and some instructors. That’s number one. Make sure your capital is there and planned out for future growth.
People and money, which is well said. We talked a little bit about it. There’s the opportunity to acquire the existing studios, but that’s a premium. You’re going to pay a premium on the profitability of any existing studio or franchise compared to running the numbers on opening a new location and modeling that out based on what you have seen from your other studios. That’s where you can create that equity, but you can’t do it without the people.
You got to have a great team and great partners. I’ve always been fond of partnerships. I’ve not had one. I like doing things together and having a team and partners around me as well. I would say that has been key for our growth as well as being aligned in what we’re trying to accomplish. Not getting too hungry as far as biting off too much that we don’t want to chew. At the same time, growing at a steady rate that we’re all comfortable with.
A business partnership can be a delicate thing, but it could be a powerful thing once you get it right. You feel like one of your strengths is to identify talent or the wild stallions. Are there things that you do in particular in terms of how you run your recruiting and interview process, or certain questions that you’ve developed over the years that are your go-to to ask? How do you know when you have the talent? What is it that stands out to you when you’re interviewing?
You don’t know until you know. I wish I had the answer before. A lot of times, you hire and then you see. The Super Bowl is coming up and I always use this analogy of a goalpost with our managers. I give them this goalpost and we continue to have this dialogue of what you can kick through the goalpost without having to ask me.
Early on, it’s reining in some decisions they might make that they want to kick. It’s probably best that we punt at this point and we’re not going to do that. It’s getting to know them that way, but also giving them the freedom to make decisions and fail so you can correct them. The key thing early on in that relationship is to give them the freedom to fail. A lot of times, you get a lot more out of your managers and team if you allow that freedom.
It sounds like you do a good job of empowering people that are within your team, which can be unique a lot of times. Like a lot of other jobs, you have a tight constraint in terms of what you’re empowered to do and not do. It’s giving folks some more runway to operate within and understanding that if they make a mistake, it’s okay as long as it’s not a massive mistake. They may kick it at the wrong goalpost, as long as we learn from that.
They run the studio a lot better than I can run it.
How do you process that? You own as many Club Pilates franchises and you can’t run the studio better than your managers. Some people like are like, “How does that even happen? You have to be the best at everything you do to operate these businesses?”
Yes, but no. The owner-operators are on a daily basis operating. I have a lot of respect for those folks because it’s hard. Having two is harder than one, and then once you get to three, it’s when you can start becoming more irrelevant in your organization.
That would be interesting to dig in. Why do you think that two are harder than one to operate?
It’s first splitting your time and knowing how to do that is hard. It’s trying to figure out how to manage two and make those decisions. Sometimes you’re hiring two managers to run both. It’s up to your P&L and bottom line, but it’s a decision you have to make to make your life better and grow. The decisions you have to make initially are tough when you go from 1 to 2.
Three is always the magic number in multi-unit development. Why do you think that is? It gets easier at three for whatever reason.
You can delegate your decision-making more effectively. It gets big enough to where you can start doing some cool stuff.
You’ve got more revenue coming in and more money to play with. People say, “Why is everybody telling me to go with three?” I’m like, “Really? That’s the magic number for whatever reason.” If you’ve been in franchising, you always hear three or the race to three if you’re thinking about a multi-unit play.
Owning the entire market is a great thing if you can. The reality is we have instructors that teach across all of our studios. In Georgia, it’s a little bit different where we’re sharing a lot of the same resources. You have to have good relationships with other owners as we do in Georgia. I’m thankful for them, but that’s not always the case.
You share instructors among other franchise locations.
You’ve mentioned that a few times and we’ve discussed that. It sounds like you’re very intentional about leaning into the franchise network, peers, and colleagues who are operating other Club Pilates studios. You’re learning and developing relationships with them because there’s so much learning that happens like peer-to-peer. You got to be intentional about it. It’s not something that you can’t call somebody after three years. You haven’t talked to them and they haven’t heard from you and ask them for help.
I have a weekly call with several other franchisees. It could be 10 minutes, 30 minutes, or 1 hour, and just checking in and seeing how they’re going.
How did you set that up?
We got to know each other at a convention and the similar ways we approach business. It’s a lonely place sometimes with business. It’s good to have those people to talk to and throw things off of, and strategize or just tell them about your week and how to handle the situation. Most likely, there are new situations every week that I have yet to handle personally. It’s good to have people that you can throw stuff at and say, “What would you do?”
Sometimes it’s as valuable as a therapy session as it is about picking up some good nuggets to implement into the business. It’s like the story of Club Pilates from what you shared. As people were opening new studios across the country, new records were being set. It kept going and going. I don’t know if anybody could predict that. You want it to happen that way, but is it going to happen that way? That’s pretty exciting and energizing to see that there are new records being broken and people breaking through ceilings.
It had changed a ton since we initially opened. The opening process had changed dramatically from that timeframe to when we opened again in 2022, as far as metrics you need to hit, what we’re doing, and what type of membership we’re selling beforehand. I was amazed. To a certain degree, I was staunched. I was like, “I don’t want to change because I had success before,” but the reality was they were doing it better. I learned to be willing to change and say, “We’ll do it that way.”
Club Pilates is a great example of one of those businesses that when you look at it from the outside in as a customer and check out the website or whatever, you’re like, “Pilates? Come on.” You start peeling back the onion and there’s a lot of sophistication in systems in place. That’s what makes Club Pilates. There was this massive untapped market that Club Pilates has been able to farm. There are a lot of strategies and intentions behind how everybody does what they do in order to achieve some of these results.
They’ve got to fine-tune. The playbook is well-written. If you follow it, you can have success. It’s a great product. People are changing their lives.
What’s next? What are the grand plans you have as you guys continue to scale?
Our mission is focused on inspiring people to take care of themselves through Pilates. It’s very simple. Concentrating on the next play and not getting too excited about what the future might look like. All three partners are in alignment as far as continuing to build successful studios, one after one. We’ll see where it takes us. We’re constantly looking at our entity and figuring out what the value might be. We’re in a place where we’re enjoying the fruits of our labor. We’re not in a hurry to the scale or exit. We do like the path we’re on right now, building these studios one at a time.
One step at a time. It’s not about the money. It’s got to be about other stuff. You’ve got to have the money or funding set up to be able to support the strategy that you have. There are a lot of nuggets that you dropped in here that if people want to hear them, they’re in there. A lot of good stuff. I appreciate you coming on and talking about your story and journey. If folks want to get in touch with you, how can they do that?
Thanks for having me. They can see me on LinkedIn. I’ll always respond on LinkedIn. That’s the best way. I don’t have a website or anything.
He’s a savvy low-key dude. That’s Jon Smith, look him up. Jon, I appreciate it. I’ll let you roll.
Thank you. I enjoyed it.