Fitness Business Case Study – Your Lease
I can’t emphasize enough the importance of business FUNDAMENTALS when it comes to running a successful fitness business or any business for that matter. You must KNOW your numbers like the back of your hand. Let me say repeat: YOU MUST KNOW YOUR NUMBERS LIKE THE BACK OF YOUR HAND
In this case….
My friend Irma simply got some bad advice. She is been working her ASS off but no matter how hard she tries she just doesn’t seem to make it. So I made a trip Culver city and Beverley Hills last Friday to what I can do to help her.
Sam Bakhtiar: Hey everybody. What’s going on? It’s your main man Seven-Figure Sam here in beautiful Beverly Hills, California but now I’m here with my really, really good friend Irma Sandoval with Carver City Boot Camp. Let’s just say that. And her landlord Michael Weiner.
Michael Weiner: It’s great.
Sam Bakhtiar: So now, I’m going to actually interview Michael because he’s an awesome guy. He’s super, super cool because I’ve been on the phone with him and trying to see why Irma wasn’t making the money that she was supposed to be making and she’s such a hard worker. She has been putting so much into it. She wants to start a family and her business is just not doing what it’s supposed to do even though she’s really, really working 12 to 14 hours a day. So anyway, so here it is. Michael is here. He’s going to – we’re going to go through the whole scenario and we’re going to go. All right. So Irma, you want to scoot over closer?
Irma Sandoval: Sure.
Sam Bakhtiar: Yeah [0:01:01] [Indiscernible]. So Michael, first of all, thank you for being here. Thank you. This is right by your beautiful office in Beverly Hills and I assume that’s probably your – I see it, the 911 Turbo right there.
Michael Weiner: [Inaudible] it should be.
Sam Bakhtiar: Yeah. Let me see. Let me see if I could zoom it in. God man, I love cars. This piece of equipment, this is – you know, OK. So anyway, Michael, we’re on the phone and you didn’t know me from [Indiscernible] and you took the time to talk to me and I explained to you that a boot camp model – we’re selling boot camps between $147 to $197 a month. A $5500 rent is not the business model. A retail place is not a business model even though you’ve gone out of your way and give Irma a great deal but it’s still a retail place and it just won’t work.
You’ve been gracious enough to tell us that hey, you know what – you would let Irma out of the lease. We’re not going after her. So I would just let you explain like the process and what – who is the realtor that actually came in and said that it was OK for you to have a $5500 overhead and all that kind of stuff? So Michael, can you tell us about that?
Irma Sandoval: I can’t comment on what the broker told her about it but I can tell you a little bit about the – I would be happy to answer your questions you got about the process that we were involved in a length of time.
Sam Bakhtiar: OK. Now when the deal was negotiated for your space that Irma leased, do you think that the realtor knew what he was talking about, that he was an experienced realtor knowing what he was doing?
Michael Weiner: It was my impression that the broker was a residential real estate broker and he’s not familiar with the commercial real estate concepts.
Sam Bakhtiar: OK. So he’s basically somebody who sold homes and basically now he came in and tried to do a deal with commercial and obviously you do commercial because you own many, many real estate properties. So was it kind of frustrating to deal with him?
Michael Weiner: I didn’t deal with him as much as my broker did. I had a commercial real estate broker TBM which is a well-known commercial real estate brokerage company. At the time that we met onside with the broker and Irma, it was my impression that he was somewhat not very familiar with commercial real estate.
Sam Bakhtiar: OK, OK. Now Irma, would you mind if I asked you a couple of questions? I just want you to be truthful about everything, right?
Irma Sandoval: Yeah.
Sam Bakhtiar: Now Irma, was it ever discussed that a $5500 overhead may not be the best business model for a boot camp or did you discuss that with anybody that – I just want to be totally honest and I don’t want to put into your mouth because I mean I own 12 boot camps and I can tell you right now $5500 overhead for a boot camp freaks me out.
So when I heard that, I was trying to figure out why because you have such great closing skills. How come you were not making money? In an hour I found out that – less than an hour, I found out that there’s nothing you really can do when you’re having a bad business model.
So what happened? Obviously you were sold something, say a franchise model. But anybody asked you what your overhead was?
Irma Sandoval: Well, what happened was I was going to visit Michael [0:04:36] [Inaudible] real estate. I told my husband –
Sam Bakhtiar: Now, who’s [Indiscernible]?
Irma Sandoval: [Indiscernible] brother.
Sam Bakhtiar: OK. So he did the [0:04:46] [Inaudible].
Irma Sandoval: Yeah.
Sam Bakhtiar: OK.
Irma Sandoval: [Inaudible] was helping me out and [Indiscernible] has helped me out, I trusted and really devoted my time and everything that [Inaudible] says I was going to do because [Indiscernible] was helping me out so much and he’s my mentor.
He was my mentor at the time. I told my husband the rent and he flipped out and I actually – he said that’s more rent. That’s really expensive. How are you going to do this? And I said I know I’m a closer. I can do it. Plus this is what they’re saying. So if they’re recommending it, I’m going to go with it.
So I went in there with the hopes and dreams that I can do it but the business model did say [0:05:19] [Indiscernible] and I thought it was expensive because my husband said it but I was good to go with what [Inaudible]. Unbeknownst to me, it was actually going against me. I was getting burned basically.
Sam Bakhtiar: OK, OK. So all right. So just for the record, I don’t – no matter what our difference is and all that kind of stuff, I don’t think that anybody had any ill intentions.
Irma Sandoval: Sure.
Sam Bakhtiar: You know what I mean? But I really don’t think somebody tried to burn you on purpose.
Irma Sandoval: Right.
Sam Bakhtiar: I just think that sometimes when we try to grow our businesses, whether it’s our boot camp or our franchise or stuff like that, sometimes we get a little more aggressive and really not look at the business model and think that we can just make money out of thin air and we can’t just make money out of thin air.
We got to really, really look at the business model. Michael, would you – I mean you’re a guy who does extremely well. You live in Beverly Hills. You have many, many real estate and all that kind of stuff. What would you say is one of the most important things? Would you agree that the real estate model like for whatever the business is, that will be the first thing you look at?
Michael Weiner: In my experience, I think business owners don’t give enough attention to how important the lease is to the success of their business. It’s a very important part of any business’s success. For example, we have people that rent space for restaurants and negotiate a [Inaudible] lease because they don’t want to commit to long term and they will spend $100,000 to [Inaudible] and in the three years, this is doing well. They want to renew their – they want to stay and they’re really at the mercy of the goodwill of the landlord. So yes, people do overlook the importance of the lease.
Sam Bakhtiar: Now Michael, I got another question for you. Normally, say you weren’t so nice. You were just a regular guy and somebody wanted to vacate your property and that they can’t fulfill the lease. What would happen normally? I mean for the record, you’re a lawyer as well. So if you weren’t so nice with [Inaudible] letting them out of their lease and you – what would the normal process be?
Michael Weiner: The process is they’re responsible for the full contract less whatever damages the landlord [Inaudible] less whatever mitigation the landlord can accomplish through the leasing space.
Sam Bakhtiar: OK. OK. Awesome. Irma? Let’s get this whole thing. This is your man Seven-Figure Sam here in Beverly Hills. Look, when you are coaching somebody, when you’re trying to help somebody, there’s a big responsibility that comes with that. I mean these are people’s lives that we’re playing with here and we got to make sure that all the fundaments are correct before moving forward. I’m in the boot camp business. Any business, it’s not just about getting clients and open up a shop. It’s about having the right business model.
Now if you don’t have the right business model, I don’t care if you’re Michael Phelps. You can’t swim upstream from the current. You cannot do it. It’s an uphill battle and you’re just not going to win. I don’t care who you are. So make sure you have the fundamentals right before you move on to anything. Thank you so much.
Michael Weiner: [Inaudible] be professional. Spend the money and have a lawyer. Review your lease and make sure you have experienced, disinterested real estate [Inaudible] as well.
Sam Bakhtiar: OK.
Irma Sandoval: Thank you.
Sam Bakhtiar: Thank you so much. See you soon. Bye-bye.
People that know Irma know that she is one of the MOST energetic, outgoing, AMAZING people that you will ever meet.
She kept asking her self why am I not making “6 figures like so and so”
Is there something wrong with me?
Maybe I need to work harder?
Maybe I need to learn more?Irma lost her confidence and really thought it had something to do with her….
After less than 30 minutes on the phone with Irma it was CRYSTAL CLEAR why she wasn’t making money. It took me less that 30 minutes not because I am that great (I am pretty darn good :) but because I followed a simple procedure and looked at her business fundamentals first.
Her rent is $5500 and she only offers boot camps that’s why she is not making money ????
Just like we preach to our clients (at least I do) that no training program in the world is going to overcome a bad diet.
No sales or marketing skill is going to overcome a bad business model. The numbers have to work it’s that F*cking simple.
I always say “If it don’t make dollars then it don’t make sense”.
I know it seems like I am picking on the “boot camp franchise boys” but I’m really not. This is waaaaay more important than me VS them. You see this types of things affects people’s lives BIG time and it has affected people’s lives BIG time. Sorry I got to call it like I see it.
As so called guru’s we have to take our role VERY seriously because we are playing with people’s lives and livelihood.
Here Are My Questions:
1) Why would anyone in the right mind recommend a $5500 month rent for a boot camp only model?
2) Why would anyone refer his brother to do a real estate deal if he has no experience in commercial real estate? (This is not the first time)
3) If your location is next to a check cashing joint, a donut shoppe and a laundromat I am going to go out on a a limb and say that’s not the right location?
4) I also learned that this “boot camp franchise” runs Groupon Promotions and get this KEEPS EVERY CENT. Is this really true????
Would Love To Know Your Thoughts On This…..