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Retail Retold Replay with Anne Mahlum

Anne Mahlum headshot
Episode #: 232
Retail Retold Replay with Anne Mahlum

Guest: Anne Mahlum
Topics: Solidcore, entrepreneurship, women-owned businesses

Transcript:

Chris Ressa 0:01
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.

Welcome to Retail Retold everyone. Today, I’m excited for you to hear my conversation with Anne Mahlum.. It was great to connect with him, because as some of you know, and I got into a debate in the beginning of the pandemic, arguing landlord and tenant positions on Jason Seattle’s digital discussions. And now that we are months and months into the pandemic, it was great to reconnect with and learned a ton about her story, and how she managed her business, through everything that’s been going on in the world right now.

Before we get into the show, I just wanted to talk about a topic that has been top of mind for me for a while. And that is the act of changing.

And what I wanted to just say is that, as you’re evaluating decisions and opportunities, sometimes the act of changing is what actually holds people back and not the change.

Over the course of time, what I have learned is that sometimes people are more stressed about the act of changing than the actual change itself.

And once people actually make the decision to change, there’s sometimes the sense of relief.

So to that end, act decisively. And remember that sometimes the act of changing is the larger stressor, and more stressful than the actual change itself.

Alright, everyone, and is a really fascinating entrepreneur. And I am sure you’re going to love hearing her stories. Enjoy the show. Thanks.

Today we have Anne Mahlum, who is the co-founder and owner of Solidcore. They have 73 locations in the United States. I am excited to have her Welcome to the show. And thanks, Chris. Yes, thank you. So and this is this business got started seven years ago, you’ve got a ton of locations. Tell us about tell me about you. And tell us about the business and all that good stuff.

Anne Mahlum 2:28
Yeah, so we opened and it’s funny, I say we now because we have a team. But I guess I opened in November 2013, I had an entrepreneurial experience before salad bar, I was running a nonprofit that I had started in 2007. called back on my feet, it uses running as a way to build self sufficiency within the homeless community. So they, which is very cool. And 14 different cities around the country, we partner with homeless shelters, and the residents of those homeless shelters join the back of my feet program, they run three days a week at 530. In the morning, we start by building confidence, self esteem, habits, discipline, all these different associations for self. And then we move our members through our program to get them employed housing and out of the shelter. So did that for six and a half years. Really purposeful and amazing experience. But you start to learn at least I was starting to learn about myself and what my gifts and talents are. And I am an entrepreneur in every ounce of my my body. And after building salad bar and growing it nationally, it was time to move on right like the what the organization needed at that point was a really good vertical operator, which I’m not like I don’t really enjoy the minutia of operations. It’s super important to the success of a business and takes a really talented, skilled, a seasoned person to I think do that. And that just wasn’t a match anymore. So I had been taking Pilates. In New York, I first went discovered in California, and I’m a workout junkie like I really love working out and has I’ve had my fair share of body issues, food issues. And when I discovered Pilates, I was like I didn’t know you could work out like this. I didn’t know you could move so slow and get the intense burn. And it was really interesting to me. So I continued to do it in New York. And everything sort of changed. My body started to change and really discernible ways. By competence by posture. I wasn’t injured, right. Being an athlete, you sort of feel like being injured is a rite of passage and like I was injured. And so I was like there’s nobody doing this. Well, there’s nobody in this space that’s really built a brand around authentic community and turn Pilates into a more athletes workout. Just like this is

What I’m gonna do, and everybody told me, Oh my god, I can’t believe you’re leaving back on my feet to open a gym, what the hell are you thinking? You know, like, this doesn’t make sense. And gyms don’t usually aren’t successful. And I’m like, it’s not a gym, it’s a studio. No one really understood a lot of that back in the day. So yeah, I left back on my feet, moved back to DC, where I had spent a good amount of time in grad school and my early parts of my career and opened, opened my first studio November 2013, and had my second studio open by February, my third one opened by May, and just have kept going. Wow. So a real awesome entrepreneurial story. And you mentioned something interesting, which is about yourself, which is, sounds like you kind of consider yourself much more a, you know, build a business brand builder, and less around running the day to day operations of the business. That’s where your passion is, and skill sets are. Is that fair? It’s, it’s fair. And I also will say, because I think it’s important that people learn to talk about the things that they’re good at. I’m a really good first phase CEO, I understand building I understand foundation and understand scaling and brand. But when the organization or company gets to sort of the next phase, where it becomes less about building brand equity, and more about professionalizing and sharpening operations, that is where I do not shine at all. And so that’s interesting. That kind of leads me to the next question is, you know, this is your baby, this solid cord? Do you know, when do you reach that point at solid core? Soon, and I’ve talked publicly about this, that I’ve started succession planning, frankly,

I think from frankly, the beginning, but truly last year, and I will also say that unequivocally, the most important job a founder has, in my opinion, is to make sure you are building something that works without you. That is the true test of an entrepreneur, is when you walk away from your business, it crumbles, it fails, it starts to decline. I don’t think you did your job. And I have been Uber focused on that from the beginning. I think it’s critical that I embody salad bars brand, but that fellow Board does not embody me, I’m really making sure I’m not in the marketing materials, that we’re highlighting our community that we’re highlighting our workout, and that this brand isn’t all about me. I think that’s very dangerous when when Bounders do that, and so soon, honestly, I feel like when before the pandemic, I think that’s the line of the year, right? For COVID. We had hired bankers, like we were on this process to move forward, you know, a sale of the company this year, and obviously, that stuff came to a halt. So my job was to get us back on track, which I feel very good about that we’ve been doing. And we can talk more about that. And then when the time was right, move into a more executive chairman, founder role, and let our next leader, CEO of the company come in and and take it to the next level. Do you already know what you’re gonna do next?

I not specifically but again, I am good at building branded communities. It is what I love. It is what I enjoy. I love bringing people together around something that positively impacts their life. So there will be more of that. And there’s definitely a political run in my future. And in some regard, I just, I care too much about obviously, deciding neighborhoods, people and I yeah, I think I can offer a different fresh perspective and some work are down the road. Wow. That’s fascinating. And you’re based Where where are you today? I also got a question. So was in Maryland for a lot of quarantine for six months. Now I’m in New York talking to you, but I just bought a place in North Dakota with my boyfriend. That’s where my family is from and all lives and yeah, about a place back there that I can spend some more time then COVID has helped realize what’s really important and wanting to have some more roots, where I grew up and have a place where I can spend some more time with my family.

Ressa 9:31
That’s fantastic. Congrats. Thank you. And

where is the business located? Where’s like your corporate office, dc, dc

some political things happening over there right now. So

really fascinating. And so you met with all these bankers, you know, did they give you a sense of how many locations they

If you needed to be in, I don’t know, if you were going to sell the company, private equity public or what the plan was, but they give you any sense of like, you know how many locations and units you really needed to have? No, I mean, listen, you can sell your company, you know, whatever you could sell it when There sure is. So, you know, my, our goal, we were on track to have 100 100 locations, by the end of the year, we had opened eight, by March 8.

Mahlum 10:25
And we had our pipeline, everything was set. So that was sort of my, you know, the pinnacle in my head of like, when we get to 100 Studios. Perfect. I feel like I did my job as the first face to its founder. You know, we are in 18 states right now, we are very diversified, from a geographic perspective, from North Dakota to Florida, to Dallas, to Philly to DC to Kentucky, like we’ve shown that we have a real diverse footprint and that our workout community brand company works in a lot of different locations. Based on the data research that we have done, it has been shown that we have room for 800 Plus locations in the US alone. So there’s a lot of white space and a lot of runway for for this company. And it has a long successful future ahead of it. So listen, we could wait to sell it at 400 and sell it for you know a lot more but one commodity that you never get back as time, right?

Ressa 11:24
That’s not as attractive to me to spend my time picking the company from 100 to 400 locations, like

not how I see the best use of my time, energy and talent. And and so these locations tell us a little bit about the studios. So how big are they do 1000 square feet. And and what are we doing? If I go to a solid core, what am I doing? You’re sweating. You’re praying, you’re crying? Now you’re you’re working out, obviously and it’s intensifies. It doesn’t take much for me to start sweating. I’ve heard that.

Mahlum 12:03
Yeah, no, it’s intensified Pilates. Right. So it’s done. We actually make our own machines. Her name is Svetlana. And she is sweating. That’s amazing. Thank you. She’s proprietary to solid core. So it’s like It’s a cross between a pilates reformer and a total body gym, you get a complete total body resistance training workout on this machine, you have a coach who takes you through a 15 minute workout. And it is I swear like, again, I’m a workout junkie, I thought I had done every workout underneath the sun. You This is the hardest and most effective workout that you’ve never done it. It’s about breaking down your slow twitch muscle fibers and what people don’t realize about working out and again, if you’ve been working out forever and whatever, please listen to what I’m going to say next. If you want to change your body and change your metabolism, you have to do resistance training. Stop doing cardio cardio is good for your heart. So right if you if you need to make some cardio advances, obviously do cardio listen to your doctor there. But resistance training is what will change your body. When you’re at solid bore you are ripping what is called your your slow twitch muscle fibers right so your muscle fibers literally rip that’s causing micro tears in your body. And so what happens when you finish class is your body starts to repair itself, right, the muscle fibers start to reconnect, they get stronger, they grow tighter. And that’s where you get muscle definition, tone and lean muscle mass in your body. And in order for you to repair those muscles what has to happen, your body has to exert more energy so your metabolism is increasing 24 plus hours after class doing all that repair work.

Ressa 13:43
Awesome. helpful insights Thank you that was great.

Mahlum 13:48
I agree resistance training is necessary to move body fat increased lean mass so

totally bought into that. And so we’re doing these intense total body combo Pilates workouts

and their 2000 fee.

Ressa 14:08
Oh, talk to me about the unit economics of it in a minute how much volume just one of these do

Mahlum 14:14
it varies honestly between where we are geographically because the price is different of course in the market but I’ll just you know we were solid core does anywhere from 1.8 million in units down to like 400k and again there’s such a big range there because we are in places like mine in North Dakota and Manhattan so it’s it’s very profit margin is very similar in in all locations. Got it so margin similar you’re keeping your expenses the same everywhere revenues different.

Ressa 14:51
And what drove growth in like where you decided to go what was the fact like you mentioned you’re in North Dakota Airmon ng

And what how do you how do you have 800? stores of potential? How do you decide like which 100? Or first How did you guys do it?

Mahlum 15:08
Yeah, so now we work with a data analytics firm, right? Because we know who our customer is. But in the beginning, we we grew where we started, we spent a lot of time opening locations in DC, and Virginia and Maryland in the DMV area. There’s a lot of opportunities simply right there. And then we went to Atlanta, and to Philadelphia were our next locations. And some of that is just making a decision, right? Because solidcore we only need hundreds of people becoming clients in that studio to make our economics work. And so you just started for DC, when we opened their boutique fitness, like we were so early, Chris, and we just got lucky with the timing. There was no SoulCycle in DC, there was no flywheel, there was no rumble, there was no orange theory, there was no core power, like we were literally one of the first. And DC is an extremely active affluent, you know, city. And so we just got a little lucky with the timing. And it was like the people there didn’t even know they were looking for something like this. We were waitlisted from the first day we opened. So again, the first five, or no, the first 10 Studios, we opened were all on the Virginia, Maryland DC area. And then we you know, chose Atlanta, frankly, just like all the major markets, my boyfriend at the time was from Atlanta, that was like, You know what, this is going to be our next market, it really wasn’t more scientific than that. And I had I had opened it back on my feet chapter in Atlanta, New this city just kind of had a gut feeling. And then the next market after that was Philadelphia, same thing I lived in Philly for five years, I knew a lot of people in Philly. So it was sort of just like personal

relationship and personal connection to those markets. And then once we started to get a little bit more, and then took on some investment, you know, we really brought a data analytics firm in to help us give us a good score on where we should be opening.

Ressa 17:05
And how many members do you typically have in one of these 2000 square feet? How many members do you typically have?

Mahlum 17:13
Yeah, it’s so we have a balance of membership and package purchasers. So you don’t have to buy a membership to be a salad or you can buy a single class, we actually liked the balance of that. So it really depends. But if you don’t need like, you can have hundreds of people who are coming to class twice a week to make the model work because we only have an average of about 14 people in a class at a time. Got it? And then the

Ressa 17:42
how much who is your customer? Tell me who your customers who solid course customer?

Mahlum 17:46
Yeah, what the data tells us, of course, is our customers female, right? She’s in her mid to mid 20s to mid 30s. And, and we have about 80% of our customer base is female. And then

about 20% of courses is male, and

all different diverse income levels, high income. Yeah, it’s about an average income level of 100k. So of course, you know, listen, it’s expensive, because it’s small group training, right, you’re not coming into a room of people with 60 people in there. And obviously, there are still expensive options in that category. SoulCycle Rumble is very similar price point to us. And they have three, four times the number of people.

We don’t charge 80 bucks to the class, right at some point, people aren’t going to be able to just dedicate those many wallet dollars for fitness. So we still have to play in that space and look at the competition and see what people are willing to pay. And those numbers work for us. You know, and you’re paying for your coach, you’re paying for the personalized attention. You’re paying for the community, and you’re paying for, you know, not being in a room with 60 people, which frankly, during COVID has really helped us you know, we didn’t have a lot of people to begin with. And when we’re cutting and doing reduced capacity classes people feel a lot safer in an environment with anywhere from you know, six to 10 people in it.

Ressa 19:14
Yeah, that’s really interesting piece and are most of your customers new to fitness or tried other fitness and failed? Or what who? Where are they coming from?

Mahlum 19:25
Yeah, they are a boutique user and they are they are an active individual to begin with. John, all cores tough to it’s safe. And this is what I love about it. You’re not jump there’s no jumping or pounding. It’s like impossible for you to get injured at solid core unless you fall off the machine or something like that. You know what will happen? Unfortunately, you know, it’s just you’re not you’re not abusing your body in that way. But it’s hard and most people who come and that’s our reputation and frankly in the beginning we’ll talk about like the design of our space. You know, boutique fitness was known as pretty feminine and almost like you know

With dainty like pure bar and things like that these small movements that just didn’t appeal to an athletic

audience, and I wanted to balance the elements in the studio, so it’s all concrete floors. It’s blue, dark lighting, it’s a loud sound system. It’s pallet wood. It’s clean space, like our scent isn’t even so feminine. It’s got like this, I think, really nice balance of masculine and feminine tones to it. And it was trying to present this like athletic space and environment and aesthetic. But we quickly became known as like the hardest workout there is. So it actually deterred people that I’m not going to that. So we’ve had to find this right balance in this space of really effective not so it’s hard, but like, the whole message is like it’s effective. Yes, it’s hard. But like, if you’re gonna work out, you might as well work out in a way that’s really going to be beneficial for your body.

Ressa 20:56
Competition, do you consider all fitness? Is it club Pilates? Is it Orangetheory? SoulCycle? Is it all boutique? Is it LA Fitness and lifetime is all fitness is? How do you look at competition,

Mahlum 21:07
we look at competition in two ways. One is finances right? People just don’t have unlimited resources to spend on fitness. So we are competing with all of those brands. And people are dedicating a certain amount of money per month to say, this is what I’m going to spend on fitness. So we want to compete for those dollars. And then the second one is really around who can do what we can do which is gives you this resistance training in the environment that we do like most likely people aren’t choosing to go to SoulCycle over solid core, because it’s a completely different workout. They may do both workouts, but it’s usually not a substitute. It’s supplemental. So it’s somebody who would be like, from a resistance training standpoint. So sure a club Pilates in New York, it’s SLD, who does you know, has a similar workout very different vibe than us. But it’s a resistance training workout. That’s, that’s using weights. Well, that’s an amazing story about you in the business and

Ressa 22:10
how you grow it. I guess I want to talk a little bit a couple minutes about fitness industry. It feels everybody in fitness is on the same team here because getting a little smacked in the face by headline news right now on everything going on with you know how COVID affected gyms? And are people going back to gyms? And how’s that going to work? And how’s that? What’s that going to look like? And what’s the future of gym? So why don’t you give us a little bit about the state of the fitness industry? From your perspective, I’m very bullish on fitness on a go forward,

Mahlum 22:45
I feel, you know, I feel there’s like a couple of things. One, I feel.

The reality is the affordability to work from home is for most people is not there, too, I think that there’s a lot of market share, because still have people over the age of 18, only 29% of Americans have gym memberships.

And that was as of 2019. And so that was pre pandemic. So I think there’s still whitespace you combine that with the fact of that people are more health aware. And you know, they’re citing that on for COVID. The you know, one of the biggest challenges is for people fighting COVID is people with obesity. And it makes sense to stay healthy. So for those reasons, I’m pretty bullish. I think you’re going to have a great

ride back to New Year’s resolutions. But that’s kind of my take,

Ressa 23:45
what’s your take on the fitness industry?

Mahlum 23:49
Well, what’s going on right now is you. So I thought the hardest part about COVID was going to be when we were shut down. Right? Like as soon as we can get reopened things will be fine. And was totally wrong about that. Right? The hardest part of COVID has been the reopening phases, because you’ve got so much confusion around COVID from our leadership. For one, it’s become very political, and people feel like the activities and the choices they’re making is almost saying what your politics are. Right. So if you’re resuming sort of similar activity, it’s you don’t believe COVID is really must be a Trump supporter. Good. That’s how that’s how I feel about how our people are choosing and there’s so much judgment around people’s activities during COVID. What you’re going to a gym, everyone in the restaurant, like you know, people are getting shamed all the time. So, one when we reopened, the mandates that were that were put upon us

have been challenging, and it’s different in every single market and I’ll give you two extremes. North Dakota there is no mask mandate in North Dakota whatsoever by any leadership, any government official, any agency whatever. So

In Manhattan, right, we have mask mandates in studios, there’s 33% capacity, it’s extremely different. And we had to do inspections with all the health officials here for every studio, they had to verify that we were operating normally and whatever. And you have to take a mask, you know, wear masks during class. So you have different temperaments for COVID, based off of the the leadership, the mandates the politics of that certain environment. And we’ve seen that, and how that actually affects our business. And again, New York, to Florida, to Dallas, to Philly, and to North Dakota, North Dakota, there are no mandates, we are able to operate at full capacity. And we have been since May, and there’s no mask mandates, business has been great there, it went back to pretty much free COVID levels, just like that. So in other places, like you know, Manhattan, just because clearly capacity, the most business we can do right now is 33% of what we were doing, if every class is full, you know, at six people in studios, so that’s super challenging. However, we are seeing increases in our business every single week in all of our markets. Good job. Yeah, thank you. And, and I think solid bore is well positioned to come out of this, I agree with everything you said, Chris, right. People are gonna there’s going to be this, I think, resounding hopefully,

conversation around health, and working out and taking care of yourself, right, like how you put your armor on for viruses, bacteria, everything, you gotta gotta be healthy, like, it’s so crazy to me to still think that the majority of people in this country, do not move their bodies on a consistent basis, and do not take care of their health. It’s, it’s we have to change, it needs to be more media attention, there needs to be more policy, there needs to be more everything to encourage and support that to happen.

Ressa 27:00
So I believe that it will, too. I think that people are craving community still they want they don’t I don’t think people want to live at home, work at home, workout at home, entertain at home, and be at home all day and do everything at home that drives people crazy. So over the next six months, frankly, even into the new year, you’re going to see people get more comfortable going back to living their lives, wearing a mask, and just learning how to better operate in this environment. Truly, I believe that because we’re seeing it in our data. And then you add the, you know, potential vaccine, there’s great therapeutics now that we are figuring out so much about this virus. And all the hype right now is oh, people will never go to a gym. Well, shit. Do you remember after 911 Oh my God, no one’s gonna fly again. Like it doesn’t happen. People forget, we figure things out, we readjust. So I have complete faith in the fitness industry, I think it’s going to actually be booming, even more than it was pre COVID. And people are going to be wanting to go back into spaces wanting to get healthy. And I think there’s a massive opportunity for boutique fitness, because it’s a controlled environment, where a gym, people are just meandering all over the place. And again, that’s fine. They’ll figure that out too. But when you come to the salad court, you’re coming in, you’re going on your machine, you’re staying on your machine, your coaches, you know, guiding you through a workout and then you’re leaving. So yeah, I’ve got more competence in the in the industry than than ever.

So two challenging questions. I’m gonna challenge you a bit. And for those who don’t know, and I went to a crazy challenge on a YouTube, you can find us debating on on real estate on YouTube on on a

on a, what I’ll call was a podcast of sorts, so you can find us debating, but I’m going to challenge you for a second and go I’m in total agreement with you though, by the way on this. This one. I’m in total agreement with you on what you’ve learned your ways.

Mahlum 29:08
What I would say is I haven’t heard anyone describe it just as you did right there, which I found quite enlightening, which is, you know, there’s all this. People work out from home, people are going to work from home people. But is everyone going to want to do everything from home all the time? I’ve had no one. I don’t know why. It’s just like a light clicked off for me because I’m on social media. I listen to podcasts or read stuff. No one’s ever unpacked it for and said like, well, if everyone’s working from home, and everyone’s you know, no one’s out socializing and going to bars and restaurants they’re eating at home, and they’re working out at home means they’re doing everything 100% from home, and people don’t want to do that. And I don’t think we’re made to do that. And I think that’s a really

Ressa 29:53
profound point. So thank you for that. But I’m going to

take a bit of challenging for a second

One on the bowtique side, you know,

given all the fitness options, is it in a recession? How do you get over? Right? If we’re in a recession, and we continue, you know, to have some challenges with the employment and this and that in the economy? How do you how do you get your head around the fact that it could be easy to drop a $200 a month gym membership, and you know, call it downgrade in price? And you know, to save some money?

Mahlum 30:34
I know, I disagree. People, I’m going to do that. Because because of what you just said before that people aren’t going to bars, restaurants and not traveling, I think people have more money. I think our customer, our client at solidcore has more savings. I know I did from being shut down for six months and not being able to travel, go do whatever, like we were saving a good amount of money, right? So I totally disagree. And I think people will make those choices to say, Listen, if we’re not going on vacation, if we’re not going out to a nice restaurant, if we’re not going, you know, weather shopping and doing these other things like I’m actually going to spend more money on fitness, because it’s something that makes me feel good. I need to get out of the house. I feel. And it’s my job as a business owner right at solid board, just like everybody else is is is responsibility to make sure that that when that person has made that decision that they say I’m going to solve it because I feel safe. I know that that I’m going to feel amazing. And the experience is worth it. And I know there COVID protocols, I feel safe in there. We have not had one spread of COVID in our studios. Kudos to you. Yeah, thanks like we we know, it’s in our best interest to keep our clients and our teammates safe. And obviously we care about them. So I think you’re going to see more people spending money on their health and their fitness, because they’re going to have more disposable income, and they’re going to make it more of a priority. All right. Well, with that, I will. I’ll take it. I love the bullish nature on fitness on solid core and the optimism I think that is really great. I guess the other question, do you think there’s going to be, you know, a shake up in fitness, some of the some people, some fitness operators went into this with some shaky balance sheets.

Ressa 32:25
Some of them were in hyper growth mode, and so they weren’t profitable yet. What? What’s your take on that piece?

Mahlum 32:34
Yes. And some people got unlucky with the timing, right? Every fitness concept I talked to was having their best year ever in 2020. We were to, and it really, so just so you were having your best year until March? March? Yes, exactly. Until Okay. And, you know, solid core is fortunate that we don’t have any debt. And that’s something that is bad, right? If you’ve got a profitable company taking debt and whatever, but we just didn’t get stuck by will did, and you know, 24 Hour Fitness and Anytime Fitness and Gold’s Gym with having their debt due during the middle of a pandemic, and having no choice but to restructure, you know, it’s sad what happened, the fly well, we I a lot of, you know, friends and people who are there and so I just like that they’re, you know, completely out of business. So I think it will actually teach people in the future to about fiscal responsibility a little bit more and not over leveraging yourself so that if something like this happens, again, that you’re not finding yourself in dangers of losing your business. So yeah, just like every industry, especially consumer facing brick, brick and mortar, there’s, there’s gonna be carnage, there are going to be leaders or firms or whomever that are just like, You know what, this is too hard. I don’t want to do it, it’s not worth it. Everybody’s having to make that call right now on what their game plan is. And even restaurants, which I know for us obviously know much more about than I do. But when you’re in New York and capacities here is like 25 to 30%, these restaurants are having to lose money to be open. And so that brings you to a point I forgot to ask and I want to pivot I’m conscious of time. At 33% occupancy, can you make money in those locations? No. Well under with normal rent, no, right. But like, you know, to go back to our debate on YouTube, we have we have we have taken our relationships with our landlords as a full time job. My general counsel dimple is unbelievable. And she has relationship manager, she on the phone communication, talking with every single landlord and our pitches Simple, right? Like we share our financials. We’re super transparent. We are one of your best long term bets. Don’t think my family about what’s going on right now. We’re going to need some support. But what good does it do you to hammer us home, you know in this moment, and then try to get somebody else in who you don’t know how long that’s going to take and whatever. We are going to need help right now.

We, we feel very confident in our ability to get through this and fulfill the length of our lease term with you and back end. I mean, listen, there’s tons of creative ways that you and I talked about to talk with landlords and figure out what their priority is, as a landlord, whether they need money now, whether they need, you know, a long term tenant, everybody’s a little bit different when we have those conversations. So that’s been a really, really important part. And we have more than half of our studios right now are as a company, we’re not making a profit right now. And that’s okay. Frankly, I’m fine with that I want to break even for the year, that is my new goal, as we talked about pivoting and having different, you know, goals, and what mindset and success is, success for us is breaking even for the year, and that’s what we’re focused on. That’s the conversation with landlords. And that’s, you know, every Is that is that is that. One of the things I forgot to ask how big is the company employees? How many people are on? Oh, my gosh, so we have I mean, before COVID, we had 100. And like, 39, full time?

Ressa 36:03
About 100 Part time and 350 contractors who are our coaches? Got it and how many people are like at the corporate office there now? are like, pre COVID.

Mahlum 36:16
About 5050? And so is is that like the conversation a lot like our goal, we’re breaking even this year, here’s the pillars we need to break even is that is that the conversation? Totally. And we I mean, listen, we take the opportunity to educate our our staff, right, who are studio managers may be their first time job, the more they know about the business. And we’re Supersprint Listen, we’re I’m also transparent when things are going well, but our profit margins, you know, and I think there’s so much demonizing of profit and money. And it’s like, Guys, listen, if your company’s not making money and successful, like, it’s not going to be around, right, this is a good thing.

Ressa 36:54
I think there’s a lot of that, and I’m gonna separate podcast, but this day and age, especially as it relates to female founders and talking about money. But anyway, so yeah, we educate we tell our teams like this is we tell them, you know, last month, we lost money, and that’s going to happen, but for the next November, December, and November, and December, you know, what our goals are, and what the studio’s need to do, and arming them with the tools to be successful and making sure that everybody is doing their part to contribute to the company as a whole right now. And we’ve been in, I’m Chris, we hired like after PPP, we hired

Mahlum 37:31
90 plus percent of our staff back, and 90 plus percent of them have been back at full salaries since then, like, it’s something I’m super proud of. Congratulations. Thank you. But like, our goal is we’re trying to make enough money to pay our rent as best we can. Right? Make sure our landlords are happy, and yes, we’re gonna have to be deals being made and to pay our people. That is the only thing I care about right now.

Ressa 37:53
Good for you.

Mahlum 37:55
I like those two things. Team and landlords.

Ressa 38:02
All right. So

the that was really awesome conversation. Really, thank you for taking us through that I, the next thing that we talk about is, you know, a story of how a location opened where it did. So where are you taking us in? To North Dakota? All right, let’s go where in North Dakota? Are we? Yeah, I mean, we’re actually we have five locations there. But I’ll take you to Bismarck, which is which is my hometown. Awesome. So tell us about it. Yeah, I mean, listen, boutique fitness is is seen as like, you know, this Miami, New York, LA these really obviously cool urban high end cities. And that’s where boutique fitness exists. And the middle of America, and a lot of cities that have 100,000 people or less don’t have any of this stuff. And obviously, I know a ton of people from growing up there. And people were just clamoring, like, and when are you bringing a salad bar here and like in the beginning of cellcom, like, it’s never gonna work. They’re like, you know, people use their wine membership for 40 bucks a month, like they will never spend what I need them to spend on fitness, you know, in Bismarck to make our model work. And it just kind of, you know, over time, and I’m like, You know what, I’m gonna do this, like, I was sick of going back to Bismarck and not being able to do salad for amazing fish in the beginning. And I’m like this, I don’t think we’re gonna lose money, like I think, well, like at least breakeven and like, I can feel good about bringing this concept back to my hometown. And it just crushed it. I mean, it was insane. People also same thing craving community around fitness, something that they could be a part of, that was different than just going to the Y. Yeah, it was awesome. And so that actually really was the impetus for our tier three expansion model. We have places in Sioux Falls in mind and North Dakota, which you’ve probably never heard of Fargo Grand Forks. There’s a lot of locations that we’re looking at and cities that have less than 100

Mahlum 40:00
1000 people because nobody else don’t know. Wow, yeah. So you get to dominate because you’ll never see somebody else going there. And so you get to dominate that, do you? I think that’s really interesting how you landed in Bismarck. So a couple of things come to mind as I unpack that one, that clearly, North Dakota expansion doesn’t come from the data data analytics, because it doesn’t say that your customers there at scale, and you’re gonna make money. But you as an entrepreneur had a gut feeling and decide, you know, I’m going to put one of these where my hometown is

Ressa 40:33
at Did you, you know, everyone there, you know, the market, they were craving it. Did you have a feeling about the real estate on where you want it to be? Yeah, definitely. And so where and what type of real estate, you’re in different types of real estate. So what type of real estate did you end up there? Yeah, it’s, I guess, for all intents purposes, it’s like a strip mall, right? There’s like a Kohl’s. There. There’s a Walmart. Sure. There’s a lot of places where people go and congregate and are going to be for the day. So it was super, it was super convenient. And it’s not like it’s inconvenient, because it takes you 1015 minutes to get everywhere in North Dakota, and there’s ample parking. But yeah, we were we were in a place that had had other big name brands that people knew. And back in places like North Dakota, there’s not a lot of local stuff, there just isn’t it’s still big names, big, big brand franchise restaurants that are all sort of nationally known. So I also felt it was important for us to be associated with some of those, because it created this legitimacy on top of, you know, me bringing it back there from Bismarck that like, Oh, this is like legit. Yeah, for sure.

Mahlum 41:39
And you go there, and you have some concerns. You figure out, you know, I’m sure the cost structure all around the labor, the rent, different than some of your other places. You had to get that in line, you figure that out. Was there a big marketing blitz that you did? None. We didn’t spend a dime on marketing until November 2017. Wow. And you? And was there things, you know, I know, there wasn’t probably like SoulCycle and stuff. But there was like CrossFit up in North Dakota, right? Yeah, I actually didn’t know too much about that community in Bismarck, though. And I knew there was the why. But again, I know our markets, women and CrossFit is not Yeah, and then a lot of women are too engaged. And we’re just so opposite from them. And then, so you end up and So who’s your customer there? Because it’s is it different than elsewhere? It’s, it’s not, it’s a little older. And it’s a little bit more like me, again, I’m 30. I’m 39. So it’s a little bit older of a clientele there. But it’s still the same breakdown of men versus women. And so there’s a lot of business people that would say that, okay, she built this model, and she broke the model, she got it to work in the place that people said it wouldn’t work. You opened in Bismarck. But it worked because she broke the mod on she got it to work, because she’s from Bismarck, and she knows everyone there and there’s this there’s this feeling of trying to support local entrepreneurs, and that those people are doing that. But you proved it out again, because you went to other as you call them tier three markets, that we’re not Bismarck, North Dakota, and how are those locations doing in Sioux Falls in all those places, Fargo and places that aren’t Bismarck? Yeah, Fargo is very, very well. And I’ll say this, like, Yes, take advantage of something like a hometown thing. But people aren’t doing solid core because of me. They’re not like waking up at 5am in Bismarck in the negative 20 degrees and thinking, oh my god, I gotta go support and like, Give me a break. Important. Now, did it help in the beginning to draw attention? Sure. But like, that’s a one time hit thing. And I think the lasting power of a brand speaks for itself, because our people are amazing back there who run it. Our community is strong, and the workout is so effective. That is why the back that is why it works. So brand community and the workout works.

Ressa 44:08
Those are three great ones was what was it a local landlord? Yeah, North Dakota landlord. Did you know him previously? No. Was he like, what is this? And? Or was did was he like? I’ll give it a shot? Yeah, I don’t remember it being tough to negotiate that deal at all, because of the success that we were able, I mean, we had 20 Plus locations and other areas. Sure. So and sharing, you know, a little bit of the model and everything else and and, you know, my sort of history of being an entrepreneur and being from there. Yeah, it didn’t it wasn’t a tenuous or arduous negotiation process. Did they have to get like waivers from Walmart and Kohl’s and everyone like that? Have you had to deal with that? I have had to deal with that with Ulta in an app

Mahlum 45:00
List. i And there was one other place. And we have some exclusivity rights now because we’re big enough. Yeah, that we, you know, we ask that but but yeah, so it hasn’t been too much of a complication for us to get approval from people, people normally like us there because of the customer that we bring to the center, too. You mentioned exclusive. Do you like or not like, you know, you mentioned the competition. If you’re across the street from LA Fitness and orange theories down the road, obviously, in Bismarck, there’s only so much while as you said, but in these other markets, to who what would your exclusive be prohibiting it? To be honest, we actually like it, we do like being next to other fitness concepts, because you already have a user who is used to go into that geography for fitness. And solid core, again, is so different in new that people have What’s that? Right? So you just you capture that walk by traffic by someone already being a fitness user, so we don’t shy away from it. And you feel confident in the brand that if you get them in the door? You can keep them? Yeah, I mean, we have a higher retention rate than a lot of other boutique fitness. And I think it’s because of yes, the workout is so different the personalization that we have in our customer journey, follow up. Awesome. Ah, anything that how many locations did you have before you did Bismarck? Um, like,

Ressa 46:26
if the finish was it, was it? This is interesting? Was it small enough that if you made the wrong move on one location, it could really hurt you?

Mahlum 46:38
Probably not one location. Because the student does studios have such a great payback period and they are profitable. So one location wasn’t gonna cause that for me at that at that point. Got it. I mean, people think that it’s like, you know, as unit Starbucks any, any place, if you have enough locations, one’s not going to hit like we actually closed a couple during the pandemic, because it’s like, these just aren’t they weren’t working that well before. And they’re not going to we just didn’t have enough competence in NAFTA to make it worth time energy and the landlord. So you know, we negotiated out of a couple of, of those deals, because it just made more sense. Yeah, sure. But if you have, if you have two locations, though, the you mess up on the third, that could be tough. The beginning matters. Yeah, totally. Listen, and yeah, listen, get a great broker, get somebody who understand what you’re doing. Look at the look at the other brands that are around where you’re going to talk to them, has there been a lot of turnover, you know, really do your homework there to understand when you know that being on the wrong side of the street can actually screw you from a from a from a profitability or a success standpoint. So ask the right questions that I think people just forget that they just think, Oh, I’ve got this concept that’s going to work. It’s so great. And there’s a lot to know that I’m sure you talked about on your podcast here, Chris. But there’s a lot to know picking the right location, the condition of the space, the parking if that’s important. That cam I mean, there’s a lot I mean, my first studio I had to close because we couldn’t attenuate the sound. The landlord didn’t think about it. I didn’t think about it. And we couldn’t stop the sound from traveling upstairs to three apartments, and we got evicted. So like it’s do your homework.

Ressa 48:21
I know that all too. Well. I have a I have a war story on a fitness and staff. So for another time. Well, that is really, really thought provoking and interesting on Bismarck, and your location there. It’s still they’re doing well. Yeah, very awesome. That’s great. Good success story there.

Anything else we didn’t talk about on Bismarck or anything else? No, I think we’re good. All right. So last part of the show you ready? Mm hmm. All right.

I’ve got three questions for you.

Question one, what is your best piece of commercial real estate advice?

Mahlum 48:52
I mean, I think I feel like I just I just said it. But know the conditions of the space that you are signing up for. There’s a difference in a cold dark shell there’s a difference in their warm vanilla shell. I didn’t know any of that crap. Before I started. I thought they were talking about ice cream cones. I mean, what are you talking about? And so you know, from the from the H vac system to the plumbing to the electricity as in the space, those things can cost you 10s of 1000s of dollars if you don’t understand the conditions that you’re releasing.

Ressa 49:29
sage advice. Next question.

What extinct retailer Do you wish would come back from the dead?

Mahlum 49:37
Oh, that’s easy. Sharper Image. Sharper Image. Oh, I love that store. Hey, like tap the air report. You can just like your flight was delayed. It was the best. Yeah, that’s a great one. The good old massage chairs. Yeah, totally. All right. So the the last question, I pick a retail product and you pick the reach

sale price and in the spirit of, you know, family getting together and trying to pass the time I am looking at

the board game cards against humanity. I don’t know if you’ve ever played Have you played? Yeah, play? What is that retail for? 9099 $25 per thank you for play. Pretty close.

I won, by the way, anything. Everyone asks that question, I’m gonna have to send people stuff.

Ressa 50:28
Now I feel like everybody else. You know how I love that?

Mahlum 50:32
If you want, I gotta get some. So fortunately for me, given that not many people have one. So yeah, you could make it that if I get it right, you got to send me the product. And if I get it wrong, I gotta send you the product. I love that. I love that I would have a lot of gifts.

Ressa 50:50
You could have the biggest pyramid scheme and podcast.

Mahlum 50:54
That’s great.

Ressa 50:56
Anyway, I’ll let you run your CEO on busy this was longer than expected but fascinating conversation.

Mahlum 51:01
Thanks, Chris. Good to talk to you. You too. Take care.

Ressa 51:06
Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you are a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode

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