Entrepreneur and co-founder of 12RND Fitness, Tim West, had a rapidly growing business and roadmaps for further international expansion in sight for 2020.
Then, COVID-19 came along, and forced the closure of about 80 franchises, and saw a 95% drop in revenue for the business.
According to West, the pandemic “knocked not just the fitness industry but the entire economy on its ass [and] took the wind right out of my sails”.
After a few days of crisis meetings with executives and franchisees, West and the 12RND Fitness team formulated a set of procedures. First was a policy of “over-communication”, where they called all franchisees personally and resolved to inform them of any new information within the hour.
Next, they budgeted for the next 12 months, ran scenarios for how the pandemic would likely unfold, and made a series of financial decisions including the renegotiation of third-party supply contracts, cuts to professional services and B2B spending and the slashing of executive and head office pay by 40% and 25% respectively.
They also fast-tracked their virtual training and online products which, West says, would act as a lifeline for franchisees. Within a few days of the COVID-19 restrictions being introduced, they released the Train: At Home app, which provides members with daily workouts.
West says they had already developed the technology, and were able to get ahead of competitors by releasing the app quickly.
“[COVID-19] has been a bit of a blessing for us. It has allowed us to bring forward really important franchise system and value upgrades, and release them at speeds which we wouldn’t have had the confidence to do without the heightened need,” West tells SmartCompany.
“We released the Train: At Home app within a few days. That would [usually] have taken months of quality assurances, testing and focus groups, but we executed it, and feedback drove its evolution.
“I don’t want this pandemic to be longer than what it is, but … it’s actually accelerated our development by at least eight months.”
According to West, the app had about 4,500 downloads over the first three days of its release, and more than 10,000 downloads in total to date.
There are plans to create a premium version for members and paid subscribers.
“We released the Train: At Home app for free as a goodwill exercise, and are now close to completing the premium [version of the] app,” West says.
“It’s another string to bow that we can provide support for members when they’re away from the club, and can add value using technology which … will help to provide scale.”
More like a team sport than exercise
West says his background is “like most people in the fitness industry”.
He describes himself as a want-to-be athlete who moved into strength and conditioning, then personal training, then gym operations with “sidelines of financial tech to support fitness issues including bookings and payments”, and then into franchising.
His experience as a tech founder includes the creation of FitText in 2003 — a messaging service that enabled clients to exercise at home — which he sold to GoodLife, and was one of the first franchisees of Jetts Fitness.
West launched 12RND Fitness — a 12 round, boxing-centred group fitness program with no fixed class times — about four years ago, and encouraged Danny Green to become involved as a co-founder.
“I met him through mutual contacts. In the initial stages, I was looking for a credible endorsement, and Danny was the best fit. After a few catch-ups … he invested formally as a shareholder,” he says.
“I’m from a sports science and coaching background and I wanted to ensure the boxing part [of the program] was legitimate and authentic. When I ran the idea by Danny, he looked at me and said … that’s exactly the way I’ve trained.
“If it didn’t feel legitimate in the way boxers trained, it would feel a bit disingenuous, so getting Danny’s support gave us the confidence to become the second-largest boxing provider in the world, and the fastest-growing by a long way.”
West identified franchising as the relevant growth model for 12RND Fitness. But, he says if the project didn’t have obvious scale potential, he would have killed the startup within the first couple of months.
“I didn’t want to produce a product that wasn’t repeatable or scalable. We worked hard on our systems before we opened our first club, had a 12-18-month [pilot], and when we were confident the results could be repeated and scaled, we formalised the franchise and sold it to a member in March 2016,” he says.
West says the first two years of the business saw organic growth with “not a single cent spent promoting franchise sales”. He adds that “advocacy-based growth” had been a part of their growth plan from day one.
After building the pilot school for less than $250,000, he says they have been cashflow positive since the second month of their pilot, and have recorded a net annual revenue of about $22 million pre-COVID-19. With more than 15,000 members, 12RND opened a new club, on average, every 11 days in 2019.
With an in-house team of 10 people, they expanded the franchise — trademarked as UBX Training — internationally, with sites in New Zealand and Singapore, and another set to launch in the United Kingdom.
“The initial capital paid for the first pilot club, the success of that paid for the expansion, and we were cashflow positive within the first four to six weeks of trading,” he says.
“We are registered in 26 countries, which provides some indication of expansion plans as well.”
25% ahead of projections
West says 12RND fitness is now in the reactivation phase of its roadmap.
With gyms opening across the country, it is developing and rolling out coaching screens — which have a patent pending — across its franchises.
He adds that 12RND Fitness is about 25% ahead of projections for ongoing revenue during this period.
“Fortunately, we have had a lot of support from members to keep the club afloat. They have participated in virtual programs and paid full or part of their membership for it,” he says.
“Each club prices membership differently, but for the virtual program, most reduced prices by about 50% … but some members voluntarily paid more … which is an amazing thing. I can’t think of many other organisations where [members] pay more as a show of support.”
He adds that franchise enquiries over the last two weeks are almost back to pre COVID-19 levels.
“As long as there’s no second wave, we’re confident that our growth will really blow up this year as we stay open,” he says.
“Hopefully we’ll be back to our previous revenue numbers within the next four months.”