Josh Cherry, CEO and Co-Founder, and Robbie Marlow, COO and Co-Founder of Delta Life Fitness, join us to talk about their franchise women-only gym.
Please excuse any typos in this hasty transcript.
Matt Register: Hey guys, welcome back to the show, Texas Business Radio. Texasbusinessradio.com is the Web site. 844-814-8144 is that 24 hour call in line. Get your calls in, get them in now, get them in the middle of the night, I really don’t care. We’re going to get the experts on here to get those questions answered. I’m your host Matt Register. Jay Curry had to step out. He’s going to join us here shortly. However we’re talking about franchises. We got a pretty interesting one for you and we’re going to get into it here in just a second. Fitness is a big business. Fitness is a very big business in Texas and is only getting bigger. And we have a franchise here, that has a unique model and a franchise model, that I think you’re going to want to learn a little bit more about. We have Josh Cherry the CEO and Robert Marlow is the CEO of Delta Life Fitness. Headquartered in Houston, Texas but all over the United States at this point. Right? Josh and Robert welcome to the show.
Josh Cherry: Hey, thanks Matt.
Robert Marlow: Yeah, thanks Matt. Absolutely.
Matt Register: So, Josh tell me a little bit about Delta Life. How did this thing start and what exactly is your model? How are you different from every other gym that’s out there?
Josh Cherry: Yeah. So Delta means change. So, Delta Life means to change your life. I got started with it early on in 2010 era with the Marine Corps being a physical training instructor with the Marines. Right? And we did it for a local group of Cub Scout moms, just in the parking lot. I took my Marine Corps knowledge and from there my more business minded brother in law, Robbie, stepped in and kind of saw the genius of it. The couple of things he liked about it was no spoilage. He’ll talk about that more here a little bit. We kind of took something that we were passionate about and we knew had legs and we just went deep on it.
Matt Register: So this is a women’s only model. So, this is a gym. It’s really quite a small space. Right? You’re talking about a small retail space. A women only gym that has some very, you know, innovative, up to date exercise models that really help empower women and, you know, help them lead better lives. Correct?
Josh Cherry: Yeah, that’s it. And, you know, you said it, we were talking earlier, you know, with radio and everything you have to innovate. You have to keep up with the times or you go away like the old school stuff doesn’t work. Right?
Matt Register: Sure.
Josh Cherry: Like the gyms of the 90’s and the early 2000’s. Big box gyms were you need 20,000 square foot and 15,000 members at $5 a month to try to make the economics of that make sense. One, you don’t change as many people’s lives and two, the economic model just doesn’t work near as good. Right? So like you said it’s revenue per square foot, that’s where you win. That’s one area. So we can go in a 2,100 square foot shopping centers here in Houston, here all over in California. Right?
Matt Register: Sure.
Josh Cherry: So that’s, that’s one thing we win. And then, and then like you said, being niche enough that we know exactly who we serve. With the women’s only fitness helps you with marketing on the front end. We know what kind of ads to put out to get the clicks, to get people interested to want to come and learn more.
Matt Register: Sure.
Josh Cherry: And then we know how to build the program to serve that client.
Matt Register: So Robbie talk to me a little bit about, because you’re a business guy. You’re, you’re an oil field, you’re an energy guy, a business guy and all of a sudden you’re in a fitness franchise. How does that happen?
Robert Marlow: Like I said, Josh started back in College Station 2009 and me and him are bother-in-laws. So, you know, I’d go down there and visit and I would see what he was doing. And no one, you know, where he was at, he was a student, he had three kids, he didn’t have a lot but he took this chance. And seeing what he was doing, and really the brilliance of the model, it’s a membership based re-occurring. So once you get the customer they stay with you.
Matt Register: Sure.
Robert Marlow: OK, there’s no spoilage. You don’t have to worry about food, throwing food out. You have to worry about things going bad. There’s really no retail space, you’re not worried about buying things and constantly keep the shelves filled up.
Matt Register: Sure.
Robert Marlow: It’s literately low, with a low buy in, low risk at the time. So you buy some equipment, you put in the gym and you get people to show up. And you get your, you know, you had, you had no variable COGS. You had COGS, you had the lease, you had, you had your rent, you had your lease, you had, you know, employee cost but everything is really low. So it was a low risk for me the times. So when I seen that, I seen what he was doing. I went to my hometown, which is southeast Texas and I started my own location there. It was really, when I say low risk, I borrowed three grand from my dad and started up.
Matt Register: Sure.
Robert Marlow: Like when I say low risk, it was low risk. But this thing started working. And with us having two location at the same time, that’s when we started really thinking, hey, we can start duplicating this thing. We can, how do we build this? We can start getting other people to operate this thing.
Matt Register: Well and I want to talk a little bit about that because a franchise, as you guys are well aware, is a very specific legal term. Right? There, that is something that you’ve got to have a lot of thought into. There’s a lot of legal work that goes in too. There’s a lot of obligations that are incurred on both, on both sides. Right? Of a franchise. Going from a single location to a double location to all of a sudden a franchise model, that is a very big leap in the life of your business. Walk me through how that happened.
Josh Cherry: So to take a note out of Doug Ducey, the CEO of Cold Stone Creamery, you know, the co-founder of Cold Stone Creamery. He said “You know we didn’t, we didn’t choose franchising. Franchising sold us or chose us”. That’s what he always says. And he says “That happened because we didn’t have the money to go spend four hundred thousand a unit to open new stores”. So Robbie and I, foolishly, and we thought we’re the only ones like this. Until we got in, you know, connected with the International Franchising Association. And see that many of the big brands that you would think, Dairy Queen, so many other ones, started the same way we did. A couple of family members operating…
Matt Register: Sure.
Josh Cherry: One profit proven model. You get another profit a proven model. You get people coming in, you systematize it, you license first, like you were alluding to. And then we were going to go the franchise model to hit scale because we didn’t think at the time we would have money to put a lot into opening the corporate stores. Right? Everybody tells you and we know it now, you know, franchising is not cheap. It’s probably, looking back, it probably would have been cheaper to go corporate stores. Because, I mean by the time you build all your franchise disclosure document, really build best in class practices of having a solid operations manual and really dialing in all the things you need to be a successful franchise. And to give the people investing in you the tools they actually need to succeed. You’re spending a half a million, you know, and we just…
Matt Register: Oh, easily. Right?
Josh Cherry: Yeah. So we thought we were choosing the cheap route. Right? Like we can hit scale faster if we franchised. Wrong. In fact, it really, you have to stop for a long time without taking any revenue.
Matt Register: Yep.
Josh Cherry: And you have to really spend a lot of capital and time investing in perfecting your systems.
Matt Register: And organizational energy. Right? I mean it just, it just sucks all the oxygen out of the room to be able to build that. But the beauty of it is, it’s now built. Right?
Josh Cherry: Yeah, absolutely.
Matt Register: So, talk to me a little bit about, you know, who is the franchisee that you’re looking for? I mean, who is the perfect one because the initial investment is very reasonable in this. Right?
Josh Cherry: Yeah. It’s about one fifth the cost of some of the other boutique studios in our space. Like, you know, Orangetheory Fitness or even one tenth of like a Planet Fitness or something like that. You know, its between 120 and 200,000. They can get all the details on the franchise disclosure document on the Web site. But, yeah, it is a relatively low cost for a fitness franchise.
Matt Register: Now that’s, it’s quite remarkable. Talk to me a little bit about where you have locations right now.
Josh Cherry: Yeah. We have locations up on, in the Northeast, like Seattle, Oregon. We have an investment company, Paradigm Investment Group has partnered with us to do a master franchise agreement for California. So, they’re under contract for 30 stores. They’ve opened the first two in Southern California, down in San Diego. We have one store up in Dallas. We have one in College Station. New franchisee, Anita and Cody opened about six months ago in College Station, Texas. Right there next to the Kohl’s in the Kohl’s shopping center.
Matt Register: Right.
Josh Cherry: We have one down in Stafford, Houston and we have one in the Bay Area. Which, obviously dealing with the weather right now. We have the whole southeast Texas area, all around Beaumont, is pretty much sold out and then we have one in Alabama and five more in Florida.
Matt Register: Well, that’s quite remarkable. If you can give advice to somebody that is considering franchising their business, what is the one thing you wish you knew when you started this, that you know now, that would have been handy to know at the beginning.
Josh Cherry: You know it’s a trick question. Right? Like I wish I would’ve known how much time and energy and money it would have taken. But at the same time, I’m glad it didn’t know that because I wouldn’t have done it.
Matt Register: Yeah. No, I got it, you know. And you know what? That’s, that’s kind of the story of my life. If I would’ve know exactly what it would’ve taken me to get somewhere, I may not have done it. But you’re glad you did, once you do it. Right?
Josh Cherry: I would, I would say you just got to fall forward, you know. When you prove it, when you have a profit proven at one unit, that doesn’t mean anything. When you have profit proven in two units, that doesn’t mean anything. At three, at four, at five, we had six stores open before a gym had ever had any one month in the red. Right? Like so, you know, you think you have it nailed. We’ve run into people with IFA that think they have it nailed. One unit doesn’t mean you’ve got it nailed. Don’t go spend a million dollars, from everybody in the franchise industry is going to try to give you operations manuals and stuff. Built it piece by piece, trial and error and that forces you to then make sure you’re building revenue proven systems along the way.
Matt Register: Yeah. And that takes a tremendous amount of time. Right?
Robert Marlow: Yes sir. And really, when you’re bringing, If you’ve got a model and you’re bringing on franchisees, be very careful because this is a partnership you’re going to bring on. If you bring in the wrong guys or the wrong partners, they’ve got to be very operational sound people. That’s something that we’ve had to learn along the way and there’s nothing against anybody out there. But the more entrepreneur, they might not be able to follow operation system. And that’s when the franchise you’re trying to, you know, bring to the table an operating system.
Josh Cherry: You had asked, like, whats, who are we looking for earlier.
Matt Register: Yeah.
Josh Cherry: And I think I never got around to answering that. And like Robbie just said, you know, when you start a new franchise business, you think you’re looking for entrepreneurs, really you’re not. You know, you want three, there’s three qualities that make a good franchisee. Right? And this is the people we’re looking for, this is the people we’re looking for to run Delta Life Fitness. One, we want somebody to be financially qualified, you know, we want to have 75 liquid, 150 net worth. Right? We want you to, we want to know that you have the experience of running a business. Can you, can you hire a W-2 employee?
Matt Register: Any business. Right?
Josh Cherry: Yeah, just a business. And then the last one is, do you know how to run the business? And ours, oddly enough isn’t a fitness business. We want to know that you have recurring revenue membership model experience. You know if you’ve run a chiropractor, if you’ve run anything that’s appointment base. Where I have to set trials and get people in for an appointment, that makes successful franchisees for us.
Matt Register: Interesting stuff. We have Josh Cherry and Robbie Marlow with Delta Life Fitness. What is the easiest way for somebody to learn more about opening one for themselves.
Josh Cherry: Either Deltalifefitness.com, you can email me, Josh@deltalifefitness.com or just Google Delta Life Fitness.
Matt Register: All right. Delta Life Fitness, I also have firstname.lastname@example.org. Is that one, that’s one as well. Right?
Josh Cherry: That goes straight to the franchising site. Yeah.
Matt Register: All right, wonderful. Guys, we got to get paid some bills ourselves. We’re going to be back right after this. Don’t go anywhere.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.