Ben Midgley and Crunch Franchise
Overnight Success is Not Over Night
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Over the years, I have made a habit of periodically rereading Jim Collins' Good to Great. The book covers many concepts. But, for me, one of the most interesting is the Overnight Success. When discussing this and the representative companies studied to write the book, it becomes clear that the overnight success is really an illusion as perceived by those on the outside looking in. But, inside, the one being defined as an overnight success has been clawing, fighting and grinding to achieve that success. In most cases, the overnight success is not over night.
Within Good to Great, Sam Walton said this about overnight success: "Somehow over the years people have gotten the impression that Wal-Mart was... just this great idea that turned into an overnight success. But... it was an outgrowth of everything we'd been doing since ... And like most overnight successes, it was about twenty years in the making."
This month's cover story, featuring Ben Midgley and Crunch Franchise, runs right along these lines. From the outside looking in, they both could be perceived as overnight successes, but that success has not been over night. Each in their own ways, Ben and Crunch have been clawing, fighting and grinding, and Club Insider has covered those journeys over the years. But, in this story, we make the connection that their paths have been similar, eventually leading to each other in what can only be described as the perfect fit.
Ben Midgley: Years ago, in 1995, Club Insider first featured Ben Midgley when he won IHRSA's Salesperson of the Year Award. He was working at Scott and Beth Gillespie's Saco Sport & Fitness at the time. The club had just rebuilt and reopened from a devastating fire, and Ben, among others, helped breathe new life into the reopened facility. Ben later moved on to 24 Hour Fitness as Senior Director of Corporate Sales, spending nine years there, then to Planet Fitness as President/EVP, spending several years there. At this point, Ben took some time for himself before working with Mark Mastrov and Jim Rowley's New Evolution Fitness Ventures and Craig Pepin-Donat in getting Crunch Franchise off the ground.
Crunch Franchise: Concurrently along Ben's path, the path of Crunch has been quite the up, down and up again ride over the years. Founded in 1989 by Doug Levine, Crunch grew to 20 facilities before being bought by Bally in 2001. In 2009, after being sold to Angelo, Gordon and Co. by Bally at a loss, Crunch filed for bankruptcy. That's when Mark, Jim and some Angelo Gordon partners stepped in, reorganizing the company and creating the franchise arm that Ben Midgley was brought in to lead.
Together: As he did working post-fire at Saco, Ben and team brought Crunch's Franchise from mere existence to prominence. From the ashes, so to speak, Crunch Franchise appears to have come out of nowhere. It appears to be an overnight success. But, that is not the case. Success has not been over night. It has been fought for all along, and that fight has continued through COVID-19, and now, the first glimpses of post-pandemic life.
With that, I invite you to read on as we interview Ben Midgley, CEO of Crunch Franchise.
An Interview With Ben Midgley, CEO of Crunch Franchise
Club Insider (C.I.) - To begin, please tell us about the core tenets and principles of Crunch Franchise today.
Ben Midgley (BM) - The first thing I think is really important about what we do, and it is a little different than other franchises, is we focus on what we call, 'Stay small to grow large.' We focus on having less franchisees that own more units. So, even though we have 1,300 units sold and 375 operating, it allows us to have a relatively small group of franchisees that constitute that, and because of this, it is much easier for us to have really close relationships with them.
Anyone who has any experience with franchising knows it's not always all rainbows and unicorns between the franchisor and franchisees. You are going to have differences of opinion, but the closeness of the relationships we have with the franchisees really allows us to work through pretty much anything. And, we almost always come out with a really good outcome that benefits both the franchisee and the franchisor. That is important. We like to be flexible and franchisee friendly. Obviously, we have to maintain the integrity of the system and the brand, but we like to have a little bit of flexibility in working with the franchisees depending on their specific environment or something that is unique to their markets. That has been helpful.
Next, of course, there is: No Judgments, without an 'E' after the G, which by the way, is the correct Americanized spelling of the word. Crunch was the original "No Judgments" gym, rooted in deep consumer insights about the fitness experience. Others have tried to imitate that philosophy, but ultimately, consumers recognize it as the core of what Crunch Fitness stands for. In fact, as consumer perceptions have evolved over the years, so has our approach to No Judgments. For us, today, it is No Judgments, No Limits, which speaks to our role in helping anyone and everyone reach their goals.
Then, finally, we are about Making Serious Fitness Fun!
C.I. - Please describe a typical Crunch facility today (size, amenities, services, etc.). How has it changed in recent years with the advent of new technologies and disciplines?
BM - Yes, we are on 2.0 right now, our second overall club design, and it is just beautiful. We began this upgrade to our box about two years. On average, we are close to 25,000 square feet. The member begins in a really beautiful lobby area. As they work through the club, there is an extensive variety of equipment, more than anybody else in our category. The member can experience group fitness offerings and Ride (our cycling concept) that are both proprietary to Crunch. In some cases, there's an additional studio where there is hot yoga or a specific personal training area as well.
We also have a really large area called the HIIT Zone, which is our customized functional training platform. We got out ahead of the industry on that within our space, and I believe we are the only company in the industry where all of our classes are accredited by NASM. And, our instructors get CECs for working with our programming, which is fantastic and very well thought-out by our Group Fitness and Operations Teams.
C.I. - That is a huge incentive.
BM - Yes, it works well. Many operators do not really think about it that much, but it matters to the instructors quite a bit. We also have what we call, Relax and Recover, which has so many different options and we are expanding all the time. It is really well done, and it feels like a separate spa-based unit within the club. And, in some clubs, we have childcare, too, called Kid's Crunch. For the clubs that offer, those spaces are getting bigger with more fun things for the kids to do.
C.I. - You mentioned all of this being part of your 2.0 model. Please tell us about the digital components of that.
BM - Yes, our digital experience is well coordinated. Everything integrates with our website and app. Those are important components. When someone comes into the club, everything is managed through what we call the Digital Tool Kit. For prospects, we also capture the reason they originally visited. Sourcing is generally a challenge for clubs, so we integrated that to make it easy for the clubs to capture all walk-ins, and TIs can be logged so there are much more accurate statistics. We have a digital tour that we bring visitors through. It is very interactive and really easy to get the club's team members to understand what to say. We are at the brand depth where the consistency of the message has to be consistent no matter where you go. Like other very recognizable brand names outside of our industry, it has to be consistent and very well done.
C.I. - I get it. It doesn't matter which industry, when I walk into a well-done franchise, I already know where the bathroom is!
BM - Exactly! We are not 100% there yet, but that is the road we have been marching down for quite some time. The aspect of consistency in the consumer experience really helps us, and it gives us a lot of great digital follow-up options as well.
C.I. - From physical to philosophical, what are Crunch's Key Market Differentiators?
BM - First of all, the box is fantastic. The 2.0 version really captures the Crunch experience. We came out of the gates fast when we started this, but the club's look and feel was lacking a little energy inside. It was a little 'safe' as graphics go with some colored lines and some pops of color. Now, the whole club is just completely gorgeous. The traffic flow is efficient. It has a modern look and is really energizing. The equipment is branded well, and each section of the club has its own distinct branding that really captures the essence of Crunch.
Next, the energy and enthusiasm from our teams are off the hook. You are not going to find the same level of employee engagement in any of our competitive set. Crunch has been around for almost thirty years. It has been a long time, and over a tenure like that, you start to get some real learnings on how to keep the team engaged and keep the energy up.
I also think that members just feel that the brand is really cool and unique as compared to other fitness brands. We have miles to go, but I would say the box is differentiating, the feeling, the programming, the overall culture in the club, and of course, the brand's longstanding cache are certainly differentiating factors for us.
The Crunch Network
C.I. - Not related to the pandemic, how many clubs are in operation overall, and how many are on the way?
BM - If you include our Signature Clubs, which are higher-priced metropolitan offerings, we are at about 375 clubs. We have another 1,000 in development.
C.I. - Wow! Now, related to the pandemic and that ongoing battle, how many clubs are open? What are some of the key restrictions on the clubs that are open?
BM - We are about 85% open. And, as you know, it is a little bit of a red state, blue state scenario. The restrictions range from outright closure to capacity restrictions to amenity restrictions. For example, you cannot do group fitness in New York. You cannot use locker rooms in other areas, and it varies by state, sometimes by county or city as well. That is what the clubs are working around now.
However, throughout our network, everybody is doing a very good job adapting. Our membership has actually grown throughout the pandemic. We are about 4% higher than when this all started, while our primary competitors are certainly down. I think that alone is a testament to the franchisees and our team's excellent work throughout this challenging period. We have also sold franchises and opened clubs every month except one during the pandemic. That has been a really positive data point as well. Now, we are starting to see the light at the end of the tunnel, and I think we fared as well as we could have during the process.
C.I. - It sounds like it! To what do you attribute your growth during this time? Did you provide a lot of digital offerings during the closure and after, as many others did?
BM - We certainly did, but we did not just rely on that. We were already in the digital space and had a feature called Crunch Live we were providing. It was only provided at a certain level of membership when we rolled it out, but we then offered it to all levels of the membership when the pandemic hit.
Workouts jumped to 100,000+ a day, which was great. Obviously, that has come back down a bit since the clubs are reopened, but it helped our members stick with their routines and obviously created a lot of member loyalty. We also had a lot of embedded growth that franchisees continued with during the shutdown, which really shows their enthusiasm for the future. Obviously, if we were in a state that was completely shut down, we did not launch a club or presale. But, if we were in one of the states that got going reasonably quickly, we continued with the presale, just under different conditions.
The support we provided the franchisees included our COVID Exposure Matrix, which is a very detailed 'what to do' if a member or teammate are exposed to someone: first level, second level, etc. That was accompanied by a 40-page readiness plan that was likely the first in the U.S. fitness industry, and it has really been invaluable. Additionally, we've also had a tremendous amount of franchisee communication throughout. We have done dozens of webinars for the franchisees during this process, and as I already mentioned, we have some awesome franchisees that worked very hard to make sure our members felt comfortable and safe. I say it all the time: Our franchisees are just really good people. They performed well, they put everything into it, and they did a good job.
C.I. - That's great! We will definitely be talking more about them and the importance of your communication with them, because I think that is a very important part of the story. Related to openings, how many new openings were there in 2020? What is projected for 2021?
BM - We opened 40 clubs last year, and are looking towards 80 in 2021.
C.I. - System wide, how many members do you service? Do you have a breakdown of membership % by price point?
BM - I would say we have over 60% with higher-priced memberships, which is nice. And, we are at 1.5+ million members now.
C.I. - Fantastic! Affecting hearts and minds out there!
Communication and the Pandemic
C.I. - You've already mentioned some of the things you've done during the pandemic. More generally, how do you go about creating back and forth dialogue with your franchisees to solve local problems as well as create group think that can be used system wide?
BM - From day one, it has been the philosophy that I talked about previously, 'Stay small to grow large.' We have been serious about that. For example, every franchisee has my cell phone number. That is also the same for the key members of our team, whether it is Craig Pepin-Donat, Mike Blouin, Chad Waetzig, Amber Martinez, Jen Renfroe, Scott Morris and others. They can reach any of us virtually any time. We have to do a little bit of scheduling sometimes, but it really is open like that.
Obviously, we have a Franchise Advisory Committee, we have our webinars, we have system-wide calls, and we have conventions and regional meetings. There are a lot of different ways to do it. We try to overcommunicate with the franchisees. Rarely will you hear that we are not communicating enough.
At the size the company is at now, we also have many more levels than when we started, which is to be expected. In the beginning, it was pulling up our bootstraps to grow the business; everyone wore multiple hats just to keep things moving, so that was a different phase. Now, we have hundreds of clubs and thousands of employees network-wide, so we have to have multiple levels of corporate employees to support all of those needs. There is someone to service franchisees for every specialty, whether it is personal training, group fitness, operations, marketing, finance, construction, real estate or other key components of the system. There is a tremendous amount of dialogue, and if something ever comes up that has not been an issue before, we can address it pretty quickly and make it part of our SOPs if necessary.
C.I. - In the past, you've had annual company gatherings for your employees and franchisees. When was the most recent of those events and are you planning on producing such events in the future?
BM - The last one we did was in October 2019, hosted in Nashville, Tennessee. It was fantastic! What a place; great energy, and everyone had a really fun time! Then, we considered going digital last year, but it was right in the middle of everyone reopening, so we held off. We did not want a digital convention to get anyone to distracted during the reopening process because this was being thrown on top. One or two states would roll in, then another few states, and you have to put all your attention on those clubs during that process, so we felt it would have been a bit of a distraction.
This year, I think we are probably going to end up with some sort of digital convention. The reason is because there are still travel restrictions in a lot of places that makes it complicated depending upon where someone lives. For example, depending upon where you live, if you leave the State now, you may have to come back and quarantine for a week or two, you might have to get a test, etc., before you or your children can resume day-to-day life, so it is a whole waterfall chain of events that gets a little tricky. But, we are going to come back with a big bang event in 2022 to celebrate getting the band back together, if you will.
C.I. - We are all going to be celebrating! Obviously, the pandemic has changed us all. Please take us through Crunch's experience during this time, from shutdown to reopening (where possible) to how it has changed your organization. Please describe your playbook in each phase.
BM - I remember we were actually having an advisory committee meeting when things really hit the fan. It was March 12, and during that meeting, we started to discuss what would happen if someone with COVID came into a club. Not more than thirty minutes after we started the conversation, one of the operators informed us that someone called their club and said they had COVID and worked out in their club. We dropped everything on our agenda and got into it right away. Later, it turned out that the person had called the wrong club, and they apologized, but it caused us to get way ahead of the planning process. We jumped into creating what became our COVID Response Matrix.
That evening, we were up until about one in the morning, and we had people from all over the country putting together our employee and member communications plan, building our marketing assets, etc. This all happened in 24 hours. Luckily, we are a company that is large enough now to have those capabilities. If you are a Mom and Pop, you may not necessarily have all the resources you need to get prepared for an event like that. We were very fortunate that we had a great group: Jim Rowley, who is our global CEO, is a former Marine and had a tremendous amount of experience with contingency planning, and he lead the process with many members of our team involved hand-in-hand: Craig Pepin-Donat, EVP of Operations; Keith Worts, CEO Crunch Signature; Dan Gallagher, CFO; Chad Waetzig, EVP of Marketing and Branding; Jen Renfroe, VP of Group Fitness; Mike Neff, EVP of Member Services; Lynn Cunningham, VP of Operations, and many more.
Then, two days later, the country shut down. At that point, the Readiness Plan was started, and Craig Pepin-Donat led that process, creating a terrific document to help all of our operators with guidelines for preparedness. As the shutdowns expanded, it became all about communication. What are the best communications to provide to the network? What are you going to tell the members? What are you going to do with billing? How are you going to keep the clubs clean and the members safe and confident? It was just an unbelievable whirlwind process, similar I am sure to what everyone else experienced. Additionally, you had to keep everyone leveled out, keep everyone focused. You needed to be balanced and measured on what the reality was and what we needed to do to execute properly.
As we reopened, the important things became how were we going to control traffic flow, spacing, club layouts, how many sanitation stations would there be, temperature checks and the lists goes on... Sourcing supplies became an issue; you could not get hand sanitizer, foggers, air cleaning units, disinfectants or may other necessities as the entire country was chasing the same products. We worked to get all these things as fast as we could, so we could get them out to the clubs.
In terms of how it changed our organization, it has made an already close team even closer and more confident in each other's abilities than ever before. We have become even more nimble and quick to react when needed, and it has certainly given us an even deeper appreciation for how good things were prior to all of this and how excited we are for when it all comes back, which it will! Up until now, no one has ever been faced with anything like this, and the saddest part of it all is that a lot of clubs are going to close, and I think, in many cases, for no reason. These businesses did not have to be shutdown. Gyms just got lumped in with bars and restaurants, and all the gyms across the country were forced to shut down without having any data to support it. Now that time has passed, the data has proven that was not the right thing to do. Even New York showed only .06% of COVID infections were related to health clubs.
Having gone through it though, in my opinion, we are much stronger, not just as Crunch but as an industry. On one side, tragically, there are going to be fewer clubs at the end of this, but on the other side, there is going to be more market share for those who make it. For Crunch, we are stronger now than before the closures, and we are in a very solid position to have a robust bounce back after all this passes. I think that is probably why our membership increased through this timeframe. Coming out of this, we are certainly trying to be one of the best options for growth in the fitness industry.
C.I. - Fantastic! I love that positive mindset; it is so important. Of course, everything else you said brings back nightmares!
BM - You try to turn it off in your brain; it was horrible, but you have to learn from it, like any other experience.
C.I. - In what ways do you feel Crunch was better prepared for the pandemic than other organizations?
BM - When you talk about being prepared, I think the first thing you really have to call out is that nobody had ever dealt with this. You don't want to say you are a company that was fully dialed in and ready for this, because no one anticipated it. The best you can say is you reacted swiftly and properly given the information you had, which looking back, I think what we did was better than most.
I think the only thing you can do is look at the capability of your organization to adapt. How fast can you do that? How well do the components of your company work together? How well do you communicate with your franchisees or your club network if you are not a franchise-based organization? Also, how well can you get your message and the plan to permeate every single person in the company's thinking? That was what we did well, and it is not because of me. I am a part of it, but we did it because of a great Crunch team and great franchisees. We have so many people in the company that did such an impressive job, and our franchisees certainly top that list as well.
C.I. - What did corporate do to help the franchisees financially?
BM - We waived royalties to the extent that we could, and we waived marketing fees. About 90% of franchisees applied for PPP loans, and there was another SBA program called the EIDL loan, which is a disaster relief loan that many took advantage of as well. And, of course, as I already mentioned, the Readiness Plan; you can't underestimate the human capital effort and expense of something like that. I mean, if you look at a large chain company, to have a readiness plan in hand within 2 - 3 weeks of a national closure is phenomenal. Many companies were still just talking about making one when our franchisees were operating with one. It gives you a big advantage.
We also had to make a lot of hard decisions when it came to employees, as did all clubs/business in the country. At one point, our industry had at least a million people out of work, which is insane. Once we got through the most painful part of that, we had to spend a significant amount of time working with franchisees to explain to them how to work with their landlords, because that was not familiar territory to a lot of operator. How do you go to your landlord to ask for rent deferrals, abatements, forgiveness or modifications? There is a lot of finesse to that, so we had a tremendous number of conversations with the franchisees to help ensure they had a basis to work with. Luckily, a lot of them did well with their landlords, which was big as the landlords are the first ones to say, 'Hey, I do not care if you are shutdown. You are still paying my rent.' Same with the financing/leasing companies. Some were great to work with, others much more challenging. Eventually, moe and more parties came around to figure out that, if one group is hurt, it will eventually affect the rest of the chain. So, everyone will be better off working creatively to find a way to work it out.
Additionally, the entire network worked hard to keep Crunch well-ranked from a customer satisfaction point of view throughout the process, and because of that, the members stuck with us and came back. That was a very important thing: Making sure we would not have a high percentage of attrition when the clubs reopened. The industry was working against the media, working against the people's fear, working against misinformation, and Crunch got through that all very well.
Now, I think we are certainly starting to see and feel the light at the end of the tunnel.
C.I. - Well, it seems we are getting back to a positive direction now, for sure. Hopefully, it stays that way.
BM - Through the broader lens, as challenging as things were/are, I view these experiences as positive, just to be honest with you. It is something I think you have to be proud of once you go through it and make it to the other side of.
The Future, Near and Far
C.I. - Well, as mentioned, at long last, several key pandemic statistics seem to be headed in the right direction. Of course, we have seen this before. With this in mind, how is Crunch approaching the near future?
BM - Grow, grow, grow...
C.I. - Not shying away, I love it.
BM - We have some ground to make up, but we are going to get the word out that Crunch is strong as ever, if not stronger, because of what we have experienced. We are very safe for members; clubs are doing well and we are moving forward with passion. So, if you are another brand and you want to come over, now is a great time to do so.
C.I. - How about longer term, 3 - 5 years, when if ever, the pandemic is considered 'over?' Number of facilities, other countries, what will make you more unique compared to today, etc.?
BM - The target number for us is 750 or more clubs in the next three to four years. That would be a nice number for us, and we should be able to hit that. We are also going to expand in the digital space; you are going to see a lot more of that. And, I would say that a lot of the backend functions you do not really see in the business processes and consumer engagement side are really going to take hold. Marketing is constantly improving as consumers change, even though our club experience is really good now, it's only going to get better. Moving forward, the strength of the brand, the consistency of the brand within the consumers' eyes will be paramount. We will be pushing ourselves up to that top-tier brand recognition level. That is where we can best serve the members and the franchisees, putting them all into the best position for success.
C.I. - That's fantastic. Well, if any of our readers are reading this and wanting to explore coming over, how do they do that, Ben?
BM - They just give us a call at (800) 669 - 7162. Or, go to our website: www.crunch.com/franchise. We are pretty easy to reach, and we would love to talk to them. We did a tremendous amount of conversions over the last two years, and we can help an owner really work through if concerting is a smart decision or not. Sometimes, it is not right based on your economics, but if you do not have a very clear exit strategy or if you are looking to scale up, then partnering up with a franchise like Crunch could be a really good thing.
C.I. - How long does that conversion process usually take, on average, if all things are firing on all cylinders?
BM - Let's say you have gone through the conversation and all the paperwork is done. Now, you are just going to execute it; you are probably looking at six months.
C.I. - Excellent, not too much downtime.
BM - Actually, No Downtime. Most all conversion clubs continue to operate all the way through the process of becoming a Crunch.
Advice From Experience
C.I. - To close out this informative interview, let's talk about you for a little bit here. Drawing on experience from your entire 30+ year career, what key lessons and advice would you share with club owners, new or seasoned, reading this right now?
BM - Wow, there are so many. For me and my career, and I think anybody who has been around for as long as I have, a key is to have learned from some tremendous people. In my career, I have Mark Mastrov, Jim Rowley and Craig Pepin-Donat, whom I have worked with for many, many years. Daily, I am working with so many really talented people like Keith Worts, Dan Gallagher, Chad Waetzig and many more. And, in my younger years, Scott Gillespie. And, that's just a few; there are many more operators whom I learned from. Everyone has a list that is a mile long. If you do not, you should write down all the people who have helped you learn the business at different levels and keep those relationships strong throughout your career.
For owners who are just getting in the business, you must know the back end of your business. You must be dialed in there. You must be solid with your leases. You must be solid with your financial structure: Debt Management and Capitalization. You must continue to grow to keep your valuations going higher. And, to get a big premium on your business, if and when you sell, you have to show real operational excellence and high customer satisfaction, which means you need to have a great team. Aggressive and smart growth requires intelligent, committed operators.
You must also be a good leader. Value your team. A lot of people make the mistake of not putting as much time into their team as they should, making them feel good, valued and as rewarded as they should be. That is one of the things that is going to carry you over the top. At the club level, you must take care of your members, your team and your facility. You must be a complete operator.
There is a final piece. Do not get so caught up with work that you forget about your family time, or you will lose your balance and your ability to success over the long-term. My first interview with Club Insider was in 1995. Time goes by fast! Now, I am at the phase in my life where it is nice to help the kids just coming into this industry. For all those just getting started: It takes time, but this is one of the greatest industries you will ever know and one you can learn from the bottom-up and end up with a really fun and rewarding career. I hope many more kids keep coming into the industry, making it better and better for the future.
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Thank you very much to Ben Midgley for his time interviewing and assistance with this story. Thank you also to Ashton Estee and Jessica Pollack for their assistance with scheduling, photos and other support activities. Finally, thank YOU for reading, and be sure to check out the Crunch Franchise Ad.