Talking Shop with Mark Norman
Guest: Mark Norman
Topics: Self-esteem Brands, service tenants, fitness tenants
Chris Ressa 0:00
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 am joined by Mark Norman. Mark is the head of real estate for self esteem brands. And Mark is a repeat guest. Last time we chatted on the podcast it was in the beginning of a pandemic. So things have changed a bit for the positive. We’re certainly going through some market volatility now. But overall things have changed for self esteem for the positive and welcome to the show, Mark.
Mark Norman 0:51
For those who don’t know, you were missed that episode, make sure you check it out. But for those who don’t, why don’t you tell the audience a little bit about who you are and what you do?
For sure. Well, and also just so everyone’s aware of self esteem brands, if you’re not familiar, we have multiple brick and mortar brands, Anytime Fitness being the biggest, with about 5000 units internationally 2400 in the US. We own Waxing the City. We own the bar method, and we own base camp fitness, which is a high intensity interval training concept that we bought on A California couple years ago.
So I’ll tell everyone a good story. Yeah. So I went to visit mark in Minneapolis. And they toured me through all the sites. And then Mark’s team egged me on to get waxed. I had never been waxed that wax in the city. And I was fighting it. But then I said I don’t know. And I’m looking at the waxing technician. I’m not sure the wax or what. Okay, what is it called?
This neurologist and she said, Let’s just wax your nose. I said my nose. I said okay, so I I lay down and you know what I was doing? Lay down. And she’s circling this hot wax in my nose, circling this hot wax. And she goes whoosh, rips it off. And like add a little jolt I had never been waxed before. I didn’t know what it felt like. And then after she was done, I said to her, I said to the serologist. They said Was there a lot of hair on it? And she looked at me and she goes, you’re definitely someone who should have their nose waxed regularly.
I give you props for that though, Chris. That was the manager by the way, too. So you were you’re a champ. Chris came out to the Twin Cities. Our headquarters is in Woodbury, Minnesota, which is a suburb of St. Paul. And he wanted the full treatment and exposure to all of our brands. So we took him to Basecamp we did a workout which I was impressed because that’s not an easy workout. Especially, you know, right off the plane. We went to Anytime Fitness to show you the new prototype and kind of the new layout. We had redesigned some of those in your office and then whacked in the city. You got wax and I have the picture, Chris, have the picture. You’re getting wax,
you gotta you gotta send me that picture. Because when I post this podcast, I’ll put the I’ll put the picture of me being waxed on it.
It’s a great photo.
Well, that’s great. So what’s going on at self esteem brands now?
Yeah, so you know, I think back to our last conversation, at least on the podcast, Chris and you know, that was a dark time for the fitness industry, right Fitness and Self Care, waxing. You know, those service users like us were COVID really hurt because we couldn’t operate in a lot of markets, a lot of states or provinces in Canada. So it was a real challenging time. We still saw the long game and we had some really good owners continue to grow through that time. But yeah, it was it was challenging. We saw the rise of peloton, right? Everyone’s getting a peloton it was on fire, right? But I think that’s another side of where we’ve seen everything come back around. Now we’re seeing our clubs at pre pandemic levels. We’re growing more and faster than we were before obviously for obvious reasons. But when you watch something like a peloton, which is a great product, people were forced to work out at home and and use those type of products which I think back to those of us that were around when NordicTrack first came out with the original ski machine I remember my parents had one and that was the coolest thing ever and then that kind of faded. The moral the story that we’ve certainly learned and we’re happy to learn is that people want to get back in person they want the accountability they want the electricity they want the group fitness and personal training but you just can’t replicate at home. So that’s what’s been exciting to see especially over the last, you know, six to 10 months.
Yeah. So, I have a home gym. And it’s, I’ve talked about it on the show before. One day I’ll just share pictures but it’s a gym I’m proud of because if you wanted to train for the Olympics, you could cut you could hire your trainer and come to my gym and you would have everything from a rower to the coolest racks that farmers carry handles. You name it. We didn’t have a peloton we got a peloton. My wife wanted a peloton we got to peloton. But here’s the thing. My wife and I, we rarely use the peloton and it’s the peloton is great. I still work out at home schedules most of the times, except on traveling my wife rarely works out at our house. Because the act of going to the gym is just as important to her as actually working out the separation of home and fitness. And like having something that’s not in the home. People don’t want to work at home, eat at home, shop at home, sleep at home workout at home and do everything at home. And that mental break and getting out and going and getting a good sweat and a good workout. Getting out of the house getting in the car. That is like therapeutic for many my wife being one of them. And the moment gyms were open, she was out of my garage.
Yep, no same. And I think what people forget sometimes, and I think we all saw this right, and all facets of our lives is the community. Right? We were more siloed right? workwise socially, and that these communities that we build the friendships we have the camaraderie at the gyms are pretty, pretty important. Basecamp Bar Method Anytime Fitness does group training, I mean, those are really good, strong local hyperlocal communities that that really keep you accountable. So I agree. For me, there might be a day where I just don’t want to go I go to base camp a lot. I do Anytime Fitness as well, small group training. But on a day, I’m not really wanting to go I just make myself go the car right there. I’m listening to music, right? It gets me fired up. Even when I get there, though, if I’m not into it, I’m doing it. And I’m making sure I do it. Because everyone expects me to be there. And I gotta get it done. So it’s been really good to your point therapeutically, mentally more. So that physically keeps me sane.
Yeah. So how’s traffic been? You know, what is traffic look like? All these, you know, self care and fitness locations. You’ve got 1000s. So you have good context of what the consumers doing. What’s traffic look like
we do, we do traffic’s really strong, Chris. So I want to put it in two different categories, because we have, you know, fitness, and we have self care. So on the self care, side waxing, I told you this at ICSC. And when you were in town, we really saw that industry as a whole Thrive out of COVID right out of the peak COVID and 2020. It came out roaring, it stayed up there. So waxing, the city has been a very strong brand, we have 130 And we’re adding new owners and more importantly, existing owners are adding number two, number three, number five, we said someone that number seven. So it’s it’s been really strong traffic on the on the personal care. And again, you can’t get waxed online, just like he can’t get your hair cut online. important, because people want to get those services done. And they have to go physically to brick and mortar to do it. With fitness. It’s it’s like I said at the beginning, we’re back to pre pandemic levels, if not exceeding them, depending on the market, right depends on the region of the US region of Canada. That’s what I’m focused on. Primarily, that’s what my team oversees. But it’s been really, really good especially to see as we got into 2022 People are back the the restrictions were what kept a lot of people away more than anything, the masking requirements in certain cities, you know, not that it wasn’t doable, and I worked out with a mask for many months. But it’s tough, right? It’s not as fun you can’t breathe as hard and so that can be a deterrent in and of itself where people might say look, I want to put my membership on hold and maybe when this gets lifted I’ll come back in so so those were tough, tough things to navigate for us not for everyone but for a lot of our gyms. And since the majority of all those restrictions have been lifted, lifted. You know, earlier this year, end of last year, we’ve seen the traffic really flourish especially in the niche classes like base camp and bar method right which are all small group classes,
yet the self care one think we forget? People want to feel good. One of the category retail categories that did the best in the Great Depression was makeup Back in December in the q4 of 2021, of the largest retails sec, one of the largest growth, one of the largest one of this retail segments that the largest growth was jewelry, I think it was up like 300%. It’s because people want to feel good, they want to, they want to look good. They want to, they care about how they look and feel. And they care about their well being. And for some jewelry makes it happen for some making sure their wax. And I think even in recessionary times those that doesn’t go away. So and a part of that is, you know, being fit, as well. So,
absolutely want to get that back to the name of our company, right self esteem brands, it all ties together. That’s why waxing is part of it. And I agree it’s self care whether it’s physical, mental, is critical. And so we certainly learned that, and I may have said this on the last podcast, but what we all learned through the pandemic is the importance of taking care of yourself. That is one of the best, if not the best defenses against any illness, right? Vaccines aside, taking care of yourself is very important for your ongoing health and quality of life. So I heard many, many stories throughout the you know, the peak of COVID, where that was something we’ve all we’ve all seen, we’ve all learned.
So talk to me about the real estate game now. And what the real estate growth is like for you guys right now.
Sure. So we’re our goal is to sign 140 leases this year, across all four brands, I’ll tell you, we’re still three quarters of those will be Anytime Fitness that brand continues to grow. Even with 2400. In the US, we see a lot more room to growth and our whitespace analysis. So we see lots of opportunity there. It’s a great all purpose gym, which we’re adding more a new prototype to which I showed you, Chris, and I can send you the video if you want to post it. But really our new motto, New Scientist training, nutrition and recovery. So we want to obviously help with training small group and large group and personal training, recovery. We’re working on some pilots with physical therapy insider studios, and nutrition, right, we acquired stronger you last year, which is nutrition coaching. So we’re trying to really make it holistic one stop shop. And when you think of any type of fitness, it’s 5000 square feet. So it’s not a massive gym. But that is the strength of it, frankly, because it’s hyper local, as we’ve seen the grocers and those neighborhood centers really thrive through through COVID. That only emphasizes the hyper locality of our locations in the community. And we love that because it’s easy to get to. We’re seeing traffic to your question earlier a little bit traffic coming steadily throughout the day at anytime versus a spike at six in the morning. Right? Then a drop, then at lunchtime spike then a drop the nighttime spike. It’s really pretty consistent throughout the day. When I shadowed a club for a day to learn the inner workings of everything. That’s certainly what I heard and saw with my own eyes was people come in 930 1030 1130 steady flow. So very interesting to see how that has shifted post COVID As people are working more and more from home. But with real estate Yeah. So anytime I’ll tell you doesn’t need to have the eight sites right it’s not built for that it’s more of a the right trade area and a B or C type location, because it’s more rent sensitive. So those have been easier to come by, I would say the other three brands we call them the studio brands Waxing the City base camp and Bar Method. It’s been more challenging and you know this there’s limited supply and quality spaces. So we’re competing with a lot of other retailers for a limited amount of quality retail space. I think there’s definitely a need for some redevelopment or new development that’s been a bit behind where it was pre COVID
is the biggest is the biggest competitor food in those locations. Is that who you’re competing with for space?
You know, it’s interesting you ask that so yes and no right so the beauty of the food is that they’re all competing with each other like no other right when I talked to food counterparts, they’re all about we need the drive thru and they all need the drive thru. So good luck as your I’m gonna fight over good for you. The beauty of this is that I’ve said this before food and service to me continue to be the future of retail, we saw that evolution continue to be amplified out of COVID with smaller spaces for the soft, good users. But food is essential and they’re going to be everywhere. But landlords cannot fill every building with food because of parking constraints and code. So the beauty of it is we are really good non food use, right? That’s gonna draw traffic consistently throughout the day, evening, not suffocate parking. So again, I would say food isn’t so much a competitor because typically the sites we’re looking at they’re saying Look, we have food here, food here. And here we have two bays, we will not do any more food. We’d love to have you guys in here. So we’re a great non food alternative.
Yeah, you make a good point on the parking. Right. And I think landlords are starting to really consider and I think this is something they were considering pre pandemic. And this is art, not science, as much as we all think it’s science is, how much is too many restaurants at a center. Right? I think people are starting to consider, what does that look like? How much is too much food? And because it’d be a lot, it’s given the amount of restaurant expansion right now, you could lease up a whole Senate and restaurants like you could figure it out. You could do restaurants everywhere. And it’d be like, you know, you know, How sustainable is this?
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Have you? So I appreciate that. Have you guys seen anything with inflation? has that impacted your guys business?
Yeah, I would I would tell you, there’s a lot of headwinds that we’re all dealing with. So I’m speaking from what I’m seeing, but obviously talking to a lot of others. On the retail side on the landlord side. Yes, inflation, supply chain issues cost for construction. rising interest rates, Chris have been a real tough on our on our franchise owners, right? They’re looking to do a new loan, new SBA loan, the interest rates have gone up significantly since six months ago. So those are definitely headwinds, which is tough, because we’re seeing a lot of positives, and a lot of interest in growth. And we’re still seeing a lot of growth. But I’m like, man, if we could lower the interest rates, make the supply chain obviously sped up, make construction costs come down a bit, we could really be flourishing even more. So that that’s that is a certainly a challenge. And I’m hearing that from from all of my other retailers I talked to, especially food users.
Yeah, construction costs are obviously near and dear to my heart that my world as our interest rates, obviously. It was interesting, I had a conversation to different people. And one was a construction expert. One was just an owner construction experts said, his view his lens, you’re gonna see construction costs subside q4 q1. And one of the reasons is some people are saying mercy, and like not building it. And some jobs aren’t getting complete. And so it’s gonna bring down the pricing. And then the the business owner said, Guys can construction costs? Like, I don’t remember where they’ve ever come down significantly? Like, so. It was an interesting, ying and yang there. I think there’s going to be some compression of construction costs. But I do think there is a new pricing, because while material costs will come down, I think we have a labor challenge in construction. You know, we have declining birth rates, lower immigration, we were going to have, you know, we have a labor challenge and construction. Therefore, I believe we I think construction costs will come down but not as much as we might hope so we’re gonna have to figure it out.
Yeah, I think that’s largely correct. I think it’s just a multitude of issues right? So it’s cost me one thing which is very big, but also just availability of supplies and contractors right? Yes, units in some markets are taking months, many months to get delivered. So it The tough thing is maybe one of those issues is reasonable to handle at a time but having both it’s really tough because you got to pay a lot to wait
I have a vacant box we’re putting in a new tenant, and then a market that’s 1000s of miles away, loving it. So I don’t have a tenant. And my construction team emailed me today, asking me if we could take the steel off the facade of the one center and use that for the other. Wow. And I was like, Well, I’m not sure I know what the ramifications are once you take it off. But is that really cheaper? And they’re like, gazillion dollars cheaper. And by the way faster? Wow. I just like, she wanted to go to property a, take the steel out of the facade. What is the what are you gonna do with this facade after you’re gonna bring the steel over this other project? And they’re like, Yeah, this is going to be better. And so they’re putting together a plan to show me right now, because I didn’t Greenlight it yet. But I’m like, Wow. You know, at least the teams being creative, but like that, that was Wow. To me.
Yeah, that is crazy. But yeah, it that’s the tough thing. Right. So you’re seeing it, too. We’re all dealing with it. And to some degree, that is a new normal. But I still think there’ll be some relief on one or both issues, hopefully later this year. Because it is it’s it’s tough for anyone to develop right now. It just it just challenging when you have to deal with those, those, the combination of those issues.
So notwithstanding the challenges, you guys have been very expansive and growing in all your brands. But you’re really excited about Basecamp right now. That’s one you’re really excited about. You’re a member of Basecamp. You took me there, it’s a cool workout. Tell me about what’s going on at base camp.
Yeah, no base camp. And again, I would encourage anyone who’s listening just to check out the website Base Camp fitness.com. It’s a 35 minute high intensity interval training workout assault bike is the key component for a minute, and then the floor with weights for a minute back and forth, back and forth for 35 minutes. And then there’s a 10 minute abs and cooldown and Chris did it. And it’s a great workout is addictive, and it’s got a great community and vibe. So we have 16 of them today. And it’s been fun because since we last talked we’ve we’ve had a lot of growth there. Obviously from our sheer numbers from where we started, when we first acquired the brand that was six, California, it’s that’s where it was founded and based by a former MMA fighter to mimic training. So I don’t want anyone to get intimidated by that. But I think that once you do the workout, you can understand that that’s a good basis for because it is intense. It’s as intense as you want to make it. But But since we’ve last spoke, Chris and I told you this in Vegas, we’ve we’ve added more locations. So we’re in California now obviously, we have three in the Twin Cities, we have three in Wisconsin, Columbia, South Carolina, we’re in Memphis, Tennessee, Chicago, we’re in west loop with a location that open ended 2021. But right now, it’s exciting because we’re actively looking and working on new deals in San Diego, Kansas City, Detroit, New York, New Jersey, Jacksonville, Tampa, Miami, Orlando. So we have a lot of a lot of growth going on. While we’re also in Houston. By the way, I forgot to mention we have a store in Houston. So really fun brand. I love the guerrilla warfare in the real estate world of being a small brand, right, and we’re going head to head trying to opposition and go head to toe with Orangetheory as an example. It’s very fun, especially with a product that is phenomenal. So we have 16. Now we have 10 ello. Eyes out as I speak. So more to come. And we’re excited to get more nearby. Many of the people listening right, as you know, Chris, you flew out to Minneapolis. That’s, that’s a good distance for you to travel to try one. Well, we’ll hopefully have one here in the near future in New Jersey. So we were excited about that brand. And it’s it’s certainly going to continue to grow. And we’re seeing a ton of interest, especially from our expansive group of Anytime Fitness owners who want to diversify and add additional brands that complement and supplement the anytime model.
So from a real estate perspective, you mentioned I went to the one it was in a great Woodbury in Woodbury great project, awesome suburb, and most of the ones are in suburban markets, but you have one in the west loop, which obviously super urban, are you? Is it a primary suburban concept, Urban Concept? Where do you see? You know, it’s
interesting that you say it that way because the it was actually born more in urban settings, right. So the first ones in California, San Francisco, Los Angeles, the first one we did in Minneapolis was downtown Minneapolis, North Loop of Minneapolis. So the more interesting thing is we’ve actually seen it be primarily urban to start but we all knew suburban would be where we, you know, grow into and so we’re continuing to look at both, I would say urban settings and first tier suburbs that are affluent and dense like Woodbury so Woodbury is one of the more fewer than we have today. But there’s more and more coming that are in more suburban settings for sure. Got
it. Got it What else are you seeing in the real estate market, you came out of Vegas? What was your take coming out of Vegas?
Well, I thought it was a great show. I thought it felt normal again, which I guess we’ve all been through this, you know, kind of new normal, but it didn’t, it didn’t feel normal. Again, I think you would agree meeting with you meeting with many of your counterparts, other landlords, other retailers, the booths, the setup, everything was back to normal. attendance was strong. And so when I when I came out was a lot of the same stuff we’re talking about, right? People are wanting to grow, especially small shop, especially food and service, which is certainly us fitness and personal care. But costs are high rents are going up. And there’s inflation and interest rates that are that are in the way a bit. So there’s a lot of good news, but there’s some some negative, or at least some things to caution everyone as we continue to move forward. But what I came out of that learning was again, that the retail market industry, brick and mortar is very strong. People are going back people want to grow. You know, it’s funny, one of the other uses that I want to throw out just when we’re talking Chris is the movie theaters, right? Movie theaters. I don’t know I might have thought they may have never come back. But I wouldn’t saw Top Gun Maverick with my family, other Father’s Day, and it was already been out for several weeks, and the theater was packed. And so it is fun to see that that industry come back a bit too. So anyway, yeah, I think a lot optimism, we’re all a little bit, you know, cautious just because COVID is kind of common waves. And it’s been a major disrupter. And all of our lives and business lives, especially for retail. Having said that, it really does feel like we’re in a new chapter and there’s a lot of optimism.
First, let’s talk about Top Gun. How’d you like it?
Yeah, yes. How’d you like it? I loved it. And by the way, Chris, I didn’t think I get my two girls 14 and 11. I swear I’ve asked them to go before like no interest. They went, I got them to go kind of begrudgingly with my wife and I. And they loved it. They wanted to watch the first one.
I don’t see the first one. So Right. I saw the first one. I haven’t seen the second one. I got to I’m a huge Topcon fan. Huge Topcon fan love Topcon. And I’m dying to see this. So it’s worth it. Mavericks, the pilot school trainer now, right?
Correct. He goes back to Top Gun and he’s the instructor and it’s anyway, it’s really well done. And you got to see the theater really well shot the the flight scenes are very cool. So yeah, I don’t know, anyone that seen it. That’s like now wasn’t for me. So it’s pretty universally liked, which is really rare.
Amazing. You mentioned something a little earlier, you’re you’re seeing rents rise? Yes. And how the franchisees dealing with that?
Again, it’s tough. You know, I’m a tenant, right? So I gotta I gotta have the tenant hat. I know, I’ve been a landlord before. So I certainly know that side. But you know, it’s, that’s the biggest factor, one of the biggest factors of their success, the rent and labor are the two biggest items. So it can be challenging, right, as I mentioned, Anytime Fitness, there’s some areas we’d like to maybe be but the rents just too high, the model just doesn’t doesn’t work in, in super high rent areas, because it’s more of a value proposition. And then for the studio brands, we want to be in the right centers, and we can pay the freight, but at a certain a certain point the freight becomes too high. And you know, food users can afford these rents, because they have, you know, much higher margins than non food users. So good landlords understand that and that not everyone can pay the same rent regardless of use, obviously. So you know, we just need to make sure we’re getting into the right situation and, and not being foolish with paying top dollar just to get into a center, and then struggle a year from now or two years from now need to get out.
Are you guys raising prices?
That is a great question. I would tell you, anecdotally, yes. Every franchisee every location can can adjust prices as they see fit to the market. And so that’s that’s separate of inflation. But I’m sure that that’s going on. I’m sure we’re raising prices when needed. I think
based on what you said earlier, the consumer understands and is paying for.
I think that’s the reality, right? I was I met with a big restaurant tour in the Twin Cities the other day and they you know, food especially they’re raising prices all over the place. I don’t think it’s as explicit as you might think. But they are right because they have to So yeah, I think the consumer is certainly paying the brunt of it. I don’t know that everyone’s fully aware of it. But that is that’s certainly what I’m seeing as a consumer myself. Yeah, the
awareness for sure. Well, listen, super exciting stuff. You guys signed 140 leases, or you’re trying Oh,
definitely. All golf. Right?
And do you have a 2023 goal?
Not yet? Not yet, but we’re moving. So like I said, it’s been really exciting. Just the last six months, Crystal, we’ve seen more new owners sign on than we have in a while across some of our smaller brands, which which is exciting.
That’s great, man. Well, I’m excited for you. This was great to have you back on. I love being out there. Anything else you want to leave the listeners with before we end today?
No, just I guess I would say, for landlords certainly consider us given our size. We’re a great fit and centers. And for as a consumer, I’m a consumer as well, just like Chris’s, try out some of our concepts. When base camp comes to your area or bar method, I strongly encourage you to try those classes. They’re great. And Bar Method is 90% female, but I’ve done the class. It’s really good for men too. So I would just encourage them to try it. Try something new, right? Try something new. Try a niche class. And if you’re at Anytime Fitness, try the personal training. It’s been a really, really big growth vehicle for us.
I have a rule. I’ll try anything twice. Right? Right. Because you know, like, you’re getting the car. And this song comes on and you’re like, I don’t like the sock cheese show. And then like three weeks later, song comes on again. And all of a sudden, you’re like singing into the song. You got to give things a second chance
for sure. For sure. But no yeah. The good news is the industry is back. It was great to see everyone in Vegas I’m sure I’ll see you in New York in December and yeah, we look forward to continuing to grow so it’s it feels again just like ICSD more like normal for us do for my team for our company. Feels a lot a lot like normal again,
which is excellent, man. Well, listen, this is great. Thank you so much. Everybody make sure you check out self esteem brands concepts again. That’s Anytime Fitness Bar Method. Wax and city base camp. And what’s the nutrition one? Stronger, you stronger you. Alright Mark Well, thanks for hopping on really appreciate it
or Fairman anytime.
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