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Back in the spring of 2012, less than two years after being cut from minor league baseball – his dream of pitching in the majors all-but-forgotten – Devan Kline, now 30, stood in a parking lot in Huntersville, North Carolina, with music blaring from his parked Dodge Challenger, and led a small crowd of women through a rigorous workout regimen of his own design. It was the birth of his women-centric gym, Burn Boot Camp, founded with his childhood sweetheart, lifeline, and now wife, Morgan.
The couple couldn’t afford proper gym space and used fences for wall sits, a cement ledge for tricep dips and a grassy hill nearby for bear crawls. “They believed in him,” says Morgan Kline, 30, the company’s COO and co-owner. “They tried us out and they stuck with it. There are several women that are clients of ours today that started out with Devan in the parking lot.”
Burn Boot Camp has come a long way from parking lots. On average, new gym franchises in the U.S. grow to 44 locations in their first four years, according to research firm FRANdata. Burn Boot Camp has opened 177 locations in 35 states since it went franchise in 2015, with another 177 sold and waiting to come online. “Based on almost 150 emerging fitness center concepts that entered the market since 2010, Burn Boot Camp is in the 99th percentile of franchised system growth in its first four years franchising,” says FRANdata senior analyst Anya Nowakowski.
As an investment compared to its peers in the space, the company scored top marks from industry intel firm Franchise Grade for low turnover, competitive royalty rates and super-fast expansion, says Franchise Grade CEO Jeff Lefler. “It has strong brand recognition and has done a good job of building a passionate client base that helps grow unit revenues for its franchisees.”
Each Burn Boot Camp franchise, which the Klines sell for the industry-average price of $40,000 apiece – largely to clients or their friends, most of them women – averages $36,000 per month in sales and pays 6% royalties to the company. The network should surpass 300 by the end of 2019, says Devan, round about the time the company moves into its new $3.2 million, 22,000 square-foot HQ in Cornelius, North Carolina.
This year the system will generate about $60 million in sales, while other revenue is derived from supplier rebates and two company-owned locations; bringing $6 million to the home office, half of that net profit. Selling supplements and apparel adds another $500,000 to earnings.
In February, Burn Boot Camp was runner-up in the International Franchise Association’s NextGen competition, a contest between 900 young franchise upstarts from around the globe, impressing a panel of finals judges led by Shark Tank star Daymond John.
“One thing I think gyms in America are lacking is a community element,” says Devan, who describes the average big box gym as a sterile place where a collection of “meatheads” ogle women. “I wanted to make something that people could walk into and not feel judged.”
“A lot of women and mom’s put themselves last,” says Morgan, whose sales analyst gig with Kelloggs supported them both during the parking lot days. “He wanted to focus on women because he noticed the difference that families felt when the mom was happy and feeling healthy.”
The $30 billion U.S. fitness industry has grown by more than 5% annually since 2009, and is expected to continue as health-conscious millennials enter their 30s and 40s. Last year there were more than 18,000 franchised gyms operating in the space and, by and large, the big name chains like Planet Fitness, at $10 per month, lead on low prices and ubiquity. Smaller ones, like Burn Boot Camp, are considered boutique—more expensive and offering niche workouts in a smaller space.
Burn Boot Camp, which charges clients about $150 per month for unlimited group sessions, is comparable to other boutiques, but pricier than larger gyms. “We’ve always had pride in competing on value,” Devan says. “Our goal isn’t to have a customer, client, or member base, but rather to create a culture of raving fan clients who would do anything to see our brand succeed.”
Creating a community of women from the start– 90% of its clientele – Burn Boot Camp offers free childcare, plus healthy food recipes and personal fitness consultations. Men are barred men from all but the early morning, evening and Saturday workout time slots, to provide a comfortable, ogling-free environment. “It’s a different dynamic when half the room is women and half the room is men,” says Devan.
Burn Boot Camp can get away with excluding 50% of the potential market, he explains, because women represent more than 70% of membership at boutique gyms. “So why not triple down on that statistic alone?”
Others have proven the concept. Brands like Shapes, Kaia Fit and Barre Code focus on female clients, and Curves managed 10,000 locations worldwide before seeing its numbers plummet as swift growth led to inadequate oversight.
Burn Boot Camp uses Facebook Live, Instagram and its BurnTV channel on YouTube to keep clients abreast of promotions and the fitness challenges it thinks up, along with fun videos of workouts from across its network—a social media echo-chamber that fuels a sense of community and word-of-mouth marketing. The Klines reject TV ads. “I can get a lot more attention for a lot cheaper on Instagram and Facebook,” says Devan.
Devan’s 90-plus podcast episodes offer workout advice and, in August, taking a stab at thought-leadership, he self-published his first book, Stop Starting Over:Transform Your Fitness by Mastering Your Psychology,on Amazon. He intends to pen another. “Our philosophy is two words,” he declares, “be everywhere.”
Devan and Morgan met when they were 12, growing up in Battle Creek, Michigan, and early on, Morgan’s household provided sanctuary for Devan from a home life marred by physical and emotional abuse. His mother left Battle Creek and dropped out of his life when he was 13 years-old. His father — a harsh man when he drank, with a tendency toward violence — was in and out of jail for various crimes. “He was loving and kind and generous, and loved seeing us excel,” Devan says, “until he got the bottle to his lips.”
Morgan, by contrast, grew up in a close and supportive household. “I had unconditional love from my stepdad and mom.” Her parents would let Devan stay with them for holidays, family get-togethers, or on occasions when Devan’s father kicked him out. “Devan started to see what it was like to have family that loves you,” says Morgan.
The two attended college in Michigan, two hours apart, maintaining an on-again-off-again relationship. Devan’s schedule of academics and sports – he’d earned a baseball scholarship – kept him too busy to hold a job and he’d donate blood for extra cash, while Morgan would sometimes transfer him money. “He had no one else to turn to,” she explains.
Athletics paid off when, at 21, Devan was drafted by the San Francisco Giants, and moved to Arizona to pitch for the club’s farm team there. Meanwhile, Morgan turned an internship at Kelloggs into a field rep position in Naples, Florida, and Devan would live with her in the off-season.
The minors spit Devan out in 2010—too many walks, not enough strikeouts. “I cried my eyes out,” he recalls. “My dreams were crushed.”
Back in Florida with Morgan, he worked as a trainer and put together a small women-only group workout – a precursor to Burn Boot Camp called Lightning 900 – vowing to earn his keep. “I refused to have my wife pay my cell phone bill for the rest of my life.”
When Morgan was offered a promotion and a move to Huntersville, North Carolina, Devan followed. He launched Burn Boot Camp in April of 2012, in the rear parking lot of a children’s gym, sub least for about $200 a month. To start up, they attracted clients with 30 days of free workouts. Most stayed.
Within a year the couple had three more locations in nearby towns, and a thousand clients, each paying $150 per month. Morgan quit her job at Kelloggs to run one of them. “I no longer had a passion to work for somebody else and climb this corporate ladder.” The Klines spent $30,000 to franchise in early 2015, figuring they could grow quickly while retaining full ownership of the brand, rather than seek growth investment by taking on a partner.
In the first two years Burn Boot Camp opened 39 locations but had sold the rights to 80 more, with further leads coming in. The 21-person home office was overwhelmed by the pace, unable to keep up with franchisees’ real estate searches, lease signings, and local marketing strategy needs. Meanwhile, the company’s IT staff was overburdened maintaining websites for each location. “There was a period of time when there were franchise partners that were not happy with us at headquarters,” says Morgan. Luckily none jumped ship.
As a fix, the Klines added 15 new employees, adding $880,000 to the payroll, including vice presidents of operations and development to manage the organization. “I love to motivate people,” says Devan. “But I am not a manager of people.” They invested in enterprise software, too, and developed lead generation funnels for new client and franchisee prospects.
That’s freed Devan and Morgan to attract potential franchisees that have the $100,000 in cash needed just to be considered, on top of the $142,000 to $350,000 it takes to open a gym—reasonable costs by industry standards. So far the Klines have sold franchises mainly to people who are already hyped on the brand—one, two or a three-pack at a time. But that strategy has yielded franchisees who, on average, own only two locations. “A lot of fitness concepts market their investment to the passionate first-time investor,” says Jeff Lefler, CEO of Franchise Grade. In franchising, real growth happens when brands can convince well-heeled franchisors to buy them in bulk.
The Klines tried that before, selling eight units to a franchisee in Orlando who bowed out after opening a single gym. Luckily the location was taken over by another franchisee. Morgan and Devan haven’t closed the door on entertaining future multi-unit deals but insist selling franchises to raving fans of Burn Boot Camp – that have business experience and the capital – assures franchisees care about creating a community among clients. Says Morgan: “That goes back to having that passion to impact people’s lives and a commitment to the brand versus ‘hey, I’m a successful business owner, I have a lot of money—give me ten gyms.’”
Building a client community loyal to the brand is also meant to provide longevity. Gym memberships took a dip during the Great Recession and Devan feels the boutique fitness space is vulnerable to an economic downturn – “which is coming!” he insists – one he fears could cut into the sales of brands that haven’t turned their clients into raving fans. “Only the strong are going to survive,” says Devan.
December 21, 2018 at 08:56AM
Forbes – Entrepreneurs