My posting frequency has declined lately because I just opened my first fitness studio. Today I’m going to tell you an interesting story about how all of this happened: how a guy who quit his corporate desk job over a year ago to follow his passion was able to open a fitness studio without startup funds and with mediocre credit.
As you may know, I started running bootcamps at Fulcrum Fitness (FF) in December of 2011. The idea was to use that job as supplemental income while I built my personal training clientele and until I could afford to leave my desk job behind. On February 15, 2012, I took the plunge and walked away from the comfortable post-college life that I had built. I quit my corporate insurance job.
My Fitness Studio
Fast forward a year and a month to March 12, 2013. I received a phone call from the owner of FF who stated that he was in financial distress and needed to let go of some assets. He asked me if I was interested in buying the location from him for $20,000.
I thought it over for a night and then called him the next day to decline the offer. Although the idea intrigued me, I didn’t feel that I was financially ready to make that commitment. A similar offer was also made to my coworker, who also declined. That evening, Wednesday March 13th, we received an email from the owner that stated the location would close at the end of the week because they couldn’t afford to keep it open.
That news was shocking to say the least. After all, the location was making money despite the owner’s inability to understand what marketing is. In the entire year and a half that I worked there, the only marketing that I was aware of was two Living Social campaigns, and an advertisement in the homeowner’s association newsletter.
Despite the owner’s lack of involvement, we had a high retention rate of the clientele that we did have. We delivered great workouts and developed a real sense of community with the membership. They looked forward to their daily workouts, and they were getting results!
My coworker didn’t think that it was fair to our members to just close the door on them on Friday without a little warning, so she announced it at her next class, and it didn’t take long for the word to spread. The owner’s phone must have started ringing off the hook with members concerned about the money that was already paid for their memberships. I think this is why, the next day, an email was sent out to the members stating the closure had been “miscommunicated”, and that we would stay open until the end of the month.
The membership was upset and confused about what was happening. Clearly having their trainers tell them one thing, while the owner is telling them another was not the best way to communicate information that would have a profound impact on everyone’s life. However, this event was only the prelude to the complete dramatic clusterf#%! that would occur over the next several days.
A company wide meeting was called on Friday, so I went in to hear what was happening, and to find out if I was even going to receive a paycheck.
It turns out that FF’s Progress Ridge location in Beaverton was a huge gaping hole for the company and money was pouring right out of it. Apparently, they signed an insanely high lease there, and didn’t have the membership to pay for it. The other locations were subsidizing it, but a breaking point had been reached.
The owner declared that he was filing bankruptcy and would have to relinquish all assets. He had found a buyer for the NE Portland and Sellwood locations. The Progress Ridge and Forest Heights locations would dissolve at the end of the month – except, he described one more possibility. One of the trainers there could “take over the bills” and assume ownership.
When Opportunity Knocks
Hearing this news got my mind racing. Where I wasn’t willing to pay twenty grand for the location, I was more than willing to just take over the bills and have my own training studio! I started having conversations with the FF owner towards this goal.
Being the blogger that I am and understanding the importance of an email list, I had emailed every single person that I ever trained there over the course of a year and a half. Having those email addresses saved independently of any of FF systems that I had access to would prove to be instrumental over the ensuing weeks.
When I decided that I would be the one to continue training all of the clients at the Forest Heights location, I pulled out my email list and sent out an email to all past and present members to gauge interest and support. I also asked the owners of FF to provide me with the location’s financial data so that I could begin to prepare taking over the financial responsibilities.
The response that I got from the email to the members was amazing! Sixty-five members took the time to respond to my email and state that they were interested in continuing to train with me. Everyone was ecstatic about their fitness studio staying open and being owned by a trainer who knows their names, their goals, and their struggles.
However, right in line with FF clusterf#%! fashion, once the owner indirectly learned of this positive response, he sent an email to the membership stating that he was happy to hear that everyone wanted the location to remain open. He said that rates would need to be raised, but that we could then continue as FF.
I was flabbergasted! I quickly drafted a resignation letter to send to the owner. Below is what I wrote.
Hi, I really don’t know what to think about this email that you’ve sent to the members of the Forest Heights location.
Going back to Friday’s meeting you stated that unless one of the trainers stepped up to take that location over as a separate entity, you would let it dissolve at the end of the month. I took you at your word for that and decided that I would be the one to do it.
I discussed this with the members, and they were happy and excited about the idea. Now, it seems like you’re taking this enthusiasm the members have displayed about staying open and looking for an opportunity to keep it going as a Fulcrum location.
I think that this whole process has been handled rather poorly. You abruptly decided to close the doors last Saturday, but then reversed to keeping it open to the end of the month. Then, you made it look like the other trainer had miscommunicated to the members, when she in fact was just repeating what you had said to us. The members really did deserve to be told in advance.
The members are really confused, and rightfully so!
Here’s a link to an email that I sent to the members in order to shore up my support for our impending conversation with the landlords: Fulcrum Fitness Forest Heights
So far, I have received 65 responses to that email with support from the members.
Attached you’ll find a Word document where I have pasted some of those responses and have redacted any personal information.
The members want an owner that is present and involved with them. They want an owner that will talk straight with them and not send them conflicting and confusing emails. In the entire time that I have worked for you, since the Forest Heights location opened, you have only been there on one single occasion where I have also been there… and that wasn’t even during a scheduled bootcamp time.
I think that the best course of action for all parties involved is for you to handle a change in ownership of the location as smoothly as possible. If you choose to change your mind on this matter and try to salvage your relationship with the members and continue onward, you must know that you will be doing so without my assistance.
On March 30th, 2013, if we have not taken concrete steps toward transferring ownership to me, then that day will be my last at Fulcrum Fitness. This is my notice of employment termination.
The members didn’t respond any kinder than I did. A whole bunch of them called to immediately cancel their accounts. Within 24 hours the owner sent another email stating that it was clear that the location could not continue to be open as FF.
Up until this point, I had felt really sorry for the owner of FF. This company that he had built up to 4 locations over several years was falling apart, and he was losing everything. However, if you want to lose my respect, then go ahead and treat me like I’m stupid.
If you want to lose my respect, then go ahead and treat me like I’m stupid.
I received the financial information for the location, and was put into contact with the new owner of FF. I was only given the 4 previous months of the Forest Heights location because prior to that the financial information was not split into separate locations. Seriously, they were running 4 locations for the better part of a year and had no idea how each one was performing individually outside of what you could extrapolate from averages of membership data.
Next, the new owner of FF contacted me to discuss the bills. He told me that for their assistance in transferring assets that I would need to pay March rent, which they had not paid, and that I would need to pay the prior owner of FF the $20,000 he had initially wanted.
Now, I’m sure that they were desperate for money, but it was incredibly insulting to receive the impression that basically they thought that I was stupid. I took the time to read through their financial information and existing lease contract. Also, through my network of clients and contacts, I had the help of a commercial real estate developer, a real estate attorney, a contract attorney, and some other really successful business people. These people gave me excellent guidance and helped me out when I needed it.
Once I examined FF’s lease, I realized that FF was unable to sublet the space without the landlords’ consent. The landlords would not give consent as long as FF was behind on the rent. Once I examined the financial information, I learned that most of the exercise equipment was leased. Essentially, they were trying to sell me a list of names that I already had, leased equipment, and full liability on a sublease that they did not have the permission to grant.
I submitted a counter offer to them that was contingent upon securing a new lease. They declined my counter offer.
We were not even able to finish the month at the location, because after their failure to get any money out of me, Fulcrum Fitness was evicted from Forest Heights a week before the month ended
Fulcrum Fitness was evicted from Forest Heights
This turned out to work in my favor. Even though I would be unable to just take over a functioning and equipped location, this would mean that I had a completely fresh start.
The very next business day after FF’s eviction, I contacted the property brokers and started discussions to take over the space myself. I simply wanted to get back in the doors as quickly as possible.
Twenty-five people signed up for 6-month memberships upfront, and just like that I had my startup money.
Open For Business
I presented to the landlords all of the emails that the membership had sent to me offering their support. They listened to my business plan and accepted my offer to stay in the location. They put together a new contract, and the location was mine. I had the doors open, and my clients had a place to work out in just 3 weeks and 3 days from the time FF was evicted.
Within two weeks of being open, I had two thirds of the former membership back.
I purchased all of the dumbbells and kettlebells that I needed, and found a great deal on a TRX frame in Seattle. With a paint job, and a new floor, the new location looks pretty swank! In fact, it’s better than it ever was.
I don’t have any hard feelings towards FF or the previous owner. Things worked out the best for me. I had empathy for the guy when all of this started, but after he tried to scam me of $20,000, I simply have indifference. He ran the place the way that he did, and he got what he got.
Here I am now, a month and a half in. I’ve hired a staff to fill out the schedule and now have one of the finest boutique fitness studios in all of Portland. New members are joining every day, and I’m super stoked to be sending out a direct mailing next week to thousands of homes in the area. The framework is set, and now I’m ready to grow. I’ll let you know how it goes.