Revolutionizing the Fitness Industry with Joey Gonzalez, Barry's CEO
Willy Walker: Good afternoon. And thank you for joining us again for another Walker Webcast. It's my real pleasure to have my friend, fellow CEO, fellow fitness junkie, fellow engaged father, and leader Joey Gonzalez joining me today. Joey is the global CEO of Barry's Bootcamp. I'm going to do a quick bio here, Joey, and then I want to dive into our conversation. As you and I were just coming on the screen, I was thanking you for waking up early in California to do this. And you told me that you'd already gone to the gym. You'd probably already done about five meetings. It doesn't surprise me whatsoever to dive into that in depth.
If you Google Joey, you are met with images of Joey's exceedingly fit body, his beautiful family, and multiple social media sites to learn more about Joey and Barry's Bootcamp. But if you go to Barry's Bootcamp website, the only thing you can find on Joey is his profile as an instructor. Says nothing about being global CEO, says nothing about attending the University of Southern California or Harvard Business School's OPM program. It says just the following: “Three words to describe my teaching style: fun, thoughtful, and reliable. My classes are challenging and achievable, so you can expect to be pushed to your limits without even noticing. My favorite day of the week is Saturday. Full body, upper body focus, and my playlist genre of choice is anything you can sing along to. On a personal note, I can't live without socializing and connecting with our community. My guilty pleasure is coconut water and tequila. My friends would say I'm a good-time guy who is loyal, fun, and trustworthy”.
Joey Gonzalez: Oh, chicken nachos. I don't know how I forgot those.
Willy Walker: Yeah, Joey, I've done 200 of these. That's the best bio I've read. I've had plenty of really impressive bios. That's the best real bio I've read. I think it's fitting to have that as your bio for this, given that you started it at Barry's as an instructor. So, let's wind back, if you will. When you started as an instructor, you'd been in Southern California, you were a child actor went to USC to study acting, an aspiring actor. And somehow or another, you found yourself at a Barry’s. Ended up doing two days at Berries, and the next thing you know, you're being an instructor. Take us back to 2005, when you actually found this company, and what was going on in your mind when you joined it and said, “I want to be an instructor here.”
Joey Gonzalez: Thank you so much for having me. It's great to see you and to be here. And I love the opening. I have not heard that bio in a while. When I think back to the early days of my career, I started acting professionally when I was 13. And I did so in musical theater first, film, TV. Absolutely loved it. I spent a decade or so working really hard through high school. I traveled a lot and worked. But my experiences as an actor in Chicago were very much driven by not only me loving the job, but also having a really great sense of community around me. And so, theater provides that. So musical theater and all the local actors there, but also had an amazing talent agent who was a family friend, after working together for a few years, knew a lot of the guys that I'd go up against in auditions and had really friendly relationships. And so, it’s exactly what you would have expected in Chicago, which is a really close-knit community. When I moved to USC, I studied acting and minored in cinema TV and started to dabble in Hollywood my third year or so. They actually had a competition on campus with a really large management group. And the prize was to get signed, and I actually won the competition. It was great. I started to work again in LA because I had taken a little hiatus, but it just felt very different. And I didn't have the same sense of purpose in the community around me. And while I still loved the work, I noticed that I was just falling out of love with it in general. And so there was a time in my life where I was looking for a new career crossroads, so to speak. And that was around the time when I stepped into the Red room for the first time and took a class at what was then called Barry's Bootcamp, which I had actually heard about for two years or so but was too scared to try. So my journey was very much the same as a lot of our clients today. But I took it, and I loved it. And fitness was not a huge part of my life at the time. I just discovered fitness, I'd say like a year or two prior, but it was really limited to going to the gym and taking my men's health or men's fitness workout. And I don't know if you remember that there have been three pages. What to lift? This was before we had it all on our cell phones. And that was really the extent of my fitness experience. But I loved it, and I went probably twice a day for the first few months. And Berry finally said to me, “Hey, do you want to teach?” And I was, “100%, I want to teach.” Everything about being an instructor resonated with me because it was my newfound appreciation and passion for fitness. But essentially, you're a performer, and we actually call them trainers at Barry's. And so, for me, it seemed this merging of two worlds that I loved equally. And I think I was really nervous about teaching my first class because I didn't want to be disappointed. But it was “love at first sweat,” for sure. I put on that mic, and I was hooked the minute I finished teaching that first class.
Willy Walker: Talk for a moment about what it takes to be an instructor at Barry's because, as you just pointed out, it's more entertainer, if you will, than just being in physically good shape. You obviously have to be able to do the class and lead people through the class, but there's more to it than that. And it's my understanding, Joey, that you still interview every new instructor who wants to be an instructor at Barry's, of all the things the company has scaled and scaled and scaled. But one thing you have not delegated and let go of is that final check that someone is capable of being a really good Barry's instructor. Is that right?
Joey Gonzalez: Yeah.
Willy Walker: So tell me why that? I would think from afar it's the location. Did you get the right lease terms? Because the studio is pretty much, as you call it, the red room, red zone?
Joey Gonzalez: By the way, I still walk to every studio before we sign a lease.
Willy Walker: I'm sure you do. I don't want to get into that. But hold for a moment about the instructors and why. Because you started there.
Joey Gonzalez: Yeah.
Willy Walker: You, as a CEO, have every hat in the company, which is hugely valuable to understanding. At Walker & Dunlop, I was never an underwriter. I was never a loan originator. There are lots of things that go on at Walker & Dunlop that I have to trust other people's skill sets to know that they know how to do it because I've actually never gone and done it, which puts me at somewhat of a disadvantage. And gives you a huge advantage of knowing everything across your entire enterprise. But why is the selection of the instructors so key to Barry's magic?
Joey Gonzalez: So our instructors are our product. When you take a fitness class, when you show up at Barry's, of course, it's so important what your experience is from the minute you walk in. But the thing that leaves people with a lasting impression are those sacred 50 minutes we have in the Red Room, and our talent at Barry's is very different from our competitors. We don't work off a WOD. There's no workout of the day. You aren't handed a winning formula on exactly what to teach and what music to play. You have total creative control. And that means if you take a 9 am class at Barry's Denver, your 10:15 a.m. class if taught by a different trainer, will be completely different. Just a completely different experience that our clients love. That puts a lot of pressure on us to make sure that we are selecting and training the best candidates. And I would actually say that Barry's core competency and the reason why we've been able to survive in a highly competitive landscape for a quarter of a century. Because people have asked for decades, is this a fad? And Barry’s only gets stronger and bigger and grows, and it's because of our ability to hire and train fitness superstars. Now, having said that, when we look for trainers, we use four words: charismatic, smart, caring, and fun. And it's literally like a checklist for us as we interview people, whether or not we see those values demonstrated.
Willy Walker: The fit is not one of the characteristics. I guess that's an assumption, but.
Joey Gonzalez: Yeah. No, fit is not one of the characteristics. First of all, my in-person interviews are only limited to founding markets. So we only open about 8 to 12 studios a year at the most.
Willy Walker: As you're trying to grow, you got 15 right now I think that you're trying to open up at 2024, so.
Joey Gonzalez: Exactly. It's really important for us to start the right way. It's really important for us to have the right founding team. And I only fly in when we usually aim to hire around 8 to 10 founding trainers. I only fly in when the final has been narrowed down to the final dozen, let's say. So I'm like a final vote. Yay or nay? And I think it is meaningful. One of the things about Barry's that makes it different is that you mentioned I was an instructor, but I still am an instructor. The organization has been led by an instructor since its inception. And that's meaningful to talent. It means a lot, I think, to an instructor who's thinking about working someplace and feels important enough that the CEO flies in to visit with them and spend time and get to know them. And so having an instructor-centric culture has always been important for me to preserve.
Willy Walker: When you talk about your instructors and how important they are, it makes me think of a number of years ago, I was in Sun Valley. Our mutual friend Jeff Jager was with me. I had a whole bunch of clients in the ski, and I invariably get a bunch of really good instructors and bring in former U.S. Ski Team people and what have you. And, my guests are, I guess, relatively impressed that they're skiing with someone on the U.S. ski team, but not terribly so. And we're in line. And I know Matt Wilbur who was a Peloton instructor. And, I said to some guys, I'm going to meet Matt Wilbur on the top of the mountain. And you would have thought I was saying to a bunch of teenage girls that I was going to be meeting Taylor Swift on the top of the mountain because all these guys are like, “Oh, I want to meet Matt. I want to meet Matt, let's go, let's go.” And I was just like, wow, that's odd and interesting. I'm curious as it relates to when Peloton, and I am jumping way ahead in what I want to talk about you about, this topic on instructors, I think it is important when, you know, peloton had a $60 billion market cap amidst of the pandemic and talent was being pulled to that online platform. A couple of things. As it relates to your talent and maintaining your talent, how do you do that? But then I think the other thing I'd be curious about is, as it appeared that online was going to take over the world and Peloton with a $60 billion market cap. What were your thoughts on the future of Barry’s and people coming back into a live, in-person studio? Did you always have the conviction that we'd get back to where we are today? Or were there moments of doubt where you said, “Man, this paradigm may have completely shifted?”
Joey Gonzalez: There are a lot of questions in there, so I'll go back. I think the first one was around, was there a competitive moment for talent when digital started to emerge? I would say during the pandemic, yes. It's few and far between. We made a decision at the beginning of Covid, and actually, Harvard Business School did a case study on Barry’s Through the Pandemic, and the decisions that ultimately leave the reader in like, should they invest or should they divest? And we decided to invest and invest big. One of the areas where I really focused on was keeping all of my instructors employed and paid, despite their inability to be teaching classes in the studio. And this was a result of an instructor-centric culture that we lead with, but also, this is our product and this is our connection. At Barry's, we're really in the business of relationships. And these people hold relationships with hundreds, in some cases thousands of our clients. And so felt it was really important to keep them engaged with the brand. And we started to do Barry's at home. We eventually launched Barry'sx, which was our digital play, where they finally could get back to teaching again. But in doing so, we really retained the majority of our talent. I'd say we lost a handful to some digital platform or another. I don't know necessarily if it was Peloton, but there was a lot at the time in a very noisy environment, so we probably lost, best guess would be 3 or 4 instructors who moved to do something digitally, which is very small considering we have over 200. And then I think the second part of your question, correct me if I'm wrong, was around my level of confidence as we emerged from Covid. And so I think one of the things that's great about life, and that we can all relate to one another with, is we only have to go off our own limited experiences. That's how we see the world. It's the filter through which we see it. And I was sitting at home begrudgingly working out digitally every day, and I was having fun, it was Barry's at home. And then Barry'sx. I loved being connected to my community which I missed so much. But it was not a replacement for me, and I was very depressed and could not wait for studios to reopen. And all I could think about was that I must not be alone. I'm sure there are thousands, hundreds of thousands, millions of people who feel exactly the same way. So that was really every single interview I did for, I think, two years, asked that question, instead of retroactively, the way you're asking it, where you know, how it ends. They were asking it like, are you going to be, okay? Do you think boutique fitness is over? Do you think in-person fitness is over? And you can watch every interview I did during the pandemic, there was never a moment where I thought it was over. I just knew we had to wait it out, and we just had to see watch slowly for the different sort of mandates to lift and for life to get back to what it was. I don't know that I necessarily anticipated the ramp to be as aggressive as it was out of Covid, but that was a pleasant surprise. I thought it might take a little bit longer.
Willy Walker: What's the typical demo of Barry's client? If you look at who's the most predominant clients, is it younger females and middle-aged males? Does it vary? Studio by studio.
Joey Gonzalez: So I'll take you through so that it definitely varies. We have some suburban studios where our average median age is probably closer to 40, 38 to 40. And then dense urban markets where they're in the high 20s. So it just depends on the city and the trade area for that matter. But our average age was actually pre-pandemic, around 33, and has now gone down to 31 point something. I think a lot of older people found habits during COVID, retrofitted their garages, etc., and have stuck to them. And there is this emerging Gen Z that is actually, and I'm sure this in search of in-person experiences and really sick of digital. And we've had an ongoing project in our brand department called Customers of Tomorrow, which really targets Generation Z and figures out how to speak to them. What things from a brand perspective could we be doing differently? So, the other interesting fact about Barry's clients is that the top 20% of our clients are responsible for over 80% of our revenue, and those top 20%, that median age is a little bit higher. That's over 35.
Willy Walker: And male-female.
Joey Gonzalez: Our male-female ratio today is around 65% female. Which seems high for a female but is actually much lower than most of our competitors. And we have more men than most of our competitors.
Willy Walker: And as it relates to instructors, a similar split as far as male-female or predominantly more female.
Joey Gonzalez: No, our instructors are 50/50.
Willy Walker: 50/50.
Joey Gonzalez: Exactly 50/50.
Willy Walker: And from a real estate standpoint, Joey, as it relates to picking locations, given that a lot of people who listen to this webcast are in the commercial real estate space and, clearly, back to office has been challenging as you're thinking about where to put maybe not the existing studios, but future studios. I'm assuming in the past it was, hey, if we can get into a dense urban area where lots of people are coming to the office, they're going to come out of the office, they're going to come to a Barry’s class given we're moving literally right now. The reason I'm doing this from home today is that we're moving offices in Denver from the downtown core out to Cherry Creek, and we're going to be a block from your studio.
Joey Gonzalez: Oh, awesome.
Willy Walker: Yeah, I know. I'm very much looking forward to going over and seeing Alexa and taking people for classes. Your Denver location is not in the urban core. It's in Cherry Creek. And that's a great location. That's probably the best office market in the country, but it's clearly got a lot of activity here in Denver. Are people moving out of downtown and out towards Cherry Creek. As you think about where you're placing your studios back to the office or not back to the office, how is that playing into the selection of sites?
Joey Gonzalez: So we have a fairly aggressive development strategy. And right now we're identifying growth in four different types of markets. The first is what you described, like a Chelsea or a Marina San Francisco. And that's the dense urban walking. Then, we have dense urban driving like LA. Then we have urban driving, of which we’ve opened a lot over the past year. That’s more secondary markets. So, Charlotte, I just signed, Charleston. We’re going to sign Salt Lake City. We have Tampa. We have these urban driving markets. And then lastly, suburban. And so we’re looking in all of these types of markets. The one thing I would say about CBD districts, which are heavy daytime population neighborhoods, those have actually been the one type of trade area that has not recovered for us. So take the Financial District of San Francisco, everyone is closed in that area, but we're still open, and we're operating at 65-70% of where we were pre-COVID, which is still great unit economics for that studio. But I don't see a path to recovery. We have a couple of other studios like that. Luckily, we very rarely targeted CBD districts even before COVID. And I can tell you now, for at least the near future, we won't be for a while.
Willy Walker: And I think about you as far as site location selection. I think about the competitive landscape. For instance, from my house here, if I go to Cherry Creek, you're there. There's also an Orange Theory there. If I go further to the south, there's a Lifetime fitness that’s like a campus. And it's very antiseptic. It's like you've gone into a college campus, if you will, with big facilities. And there's nothing personalized about it whatsoever. It's a beautiful facility. But that's a very different experience than going to one of your classes. Is it an Orange Theory? Is it a Lifetime fitness, or is it the local yoga studio that you are either pulling clients from or losing clients to?
Joey Gonzalez: I guess you're asking me how I would identify our competitors. Yeah, I think it does depend on the market. I start off by saying when you look at the landscape of boutique fitness, Barry’s definitely sits in the premium category. I think that's not only brand perception from a consumer standpoint but also pricing strategy. And so for that reason alone, I would think Orange Theory would be less of a competitor for us. I think we're competing more with the SoulCycle, Reformer Pilates of the world. I do think to some extent, we pull from the Lifetime fitness, Equinoxes of the world, like high-end big boxes. But I also know, because we've surveyed, that a lot of our clients keep their gym memberships, and they do both. So in terms of our competitors, I actually think directly competitor-wise, the premium boutique fitness category has actually thinned out in a post-Covid world as opposed to where it was. But at the same time, all of this, this explosion in wellness that you've seen, whether it's focused around fitness or recovery, we're all competing for wallet share. And so I think to a certain extent, people are going to allocate money towards wellness. And I think whether you're providing HIIT workouts or saunas and vitamin C showers or baths, you're all competing for that wallet share.
Willy Walker: I know that you have lift classes, you also have swapped out the treadmill for bikes and done what I would call Bike. You're known for the Red Room. You're known for the treadmill to get the cardio, and you're known for the weights across the room and moving back and forth. How challenging is it to broaden the offering with both understanding the clients may want the broadening of the offering? And yet, at the same time, to some degree diluting the core product that is the brand of Barry’s, if you will.
Joey Gonzalez: So we've always been a mission-vision, values-driven organization and I'll never forget. Like the first week of Covid, I asked my team to pull them out. And said, take a look at the mission-vision values. Do you see anything there about treadmills? No. Do you even see anything there about fitness? No. It really is about transforming lives worldwide. Our mission is to inspire people to be their best and to work hard and have fun and all of these things that hopefully you feel when you go to Barry’s. But that really kind of set the tone for us to embrace one of our core values, which was to remain innovative. And we really started to think about both digitally as well as we launched two dozen outdoor studios around the world. How we can continue to stay connected to our clients. And how can we possibly, because Barry’s, for a long time, has been intimidating to consumers. The most famous first words for us are I'm not a runner. And so if you have this mission and vision statement and you want to broaden your addressable market it does make sense to come up with alternatives for your clients, or for your future clients, rather. So, Barry's lift was something that was actually born. Gosh, was probably 2013 that was the first studio. And we just had extra space in Wainscott in East Hampton. And I noticed that our double floor. So when you take Barry's, you can book a treadmill. You can book a floor spot where you're lifting. You're going to do both. The third option is to book a double floor, which means you do not do a treadmill. And I noticed across the country, the double floor was a very highly utilized position. And so I thought, well, why don't we just try a class that's 50 minutes of weightlifting, and we'll just eliminate the cardio altogether? And it was very successful, very highly utilized. It actually remains. We have 15 studios left today, and it remains our top utilized product in the market. Capacity is lower than in an average Red Room. So obviously, that makes it easier to fill, but still high demand for that product. And then Ride came out of really wanting to offer a low-impact solution to people. And I think a lot of our clients have described it as a gateway drug. A lot of people who used to be afraid of Barry will now come with their friends, their sisters, and their moms and try Barry’s. And it's been great for me because I'm also getting to a point in my life where I like to mix up like I love to run, but I'm not 30 years old any longer. So it's nice for me to be able to have that mix and to stay with the brand.
Willy Walker: When the pandemic hit. I know you never closed a Barry’s before.
Joey Gonzalez: Yeah.
Willy Walker: And I was just curious why someone might want to work out at 3:00 in the morning at 9:00. So an Equinox might want to stay open all night. But you, Barry's, are all about classes, and you're not scheduling classes at 2 a.m. Why did Barry's have a 24/7 policy previously when people just came and used it at 1:00 in the morning?
Joey Gonzalez: I would say our policy was never 24/7. It was 365 days.
Willy Walker: 365 days a year.
Joey Gonzalez: Yeah.
Willy Walker: Got it. Another question was, you've got 14 countries, and then you've got 80-plus studios. You were talking about the mission to have a global impact. When I came to Walker & Dunlop, and we had one office and 46 employees, I was like, I'd been abroad. I lived in Latin America and built a big company in Latin America, had been in Europe, and built a big company in Europe. All my business contacts were outside of the United States, but I looked at the US and said, this is the largest commercial real estate market in the world. I have so much to do here. Why am I going to get on an airplane to London or to Mexico City? Let's just focus on the US. And for the past 20 years, all we've done is grow W&D inside the US. And right now, given how strong the US economy is, that's been a great strategy. There have been other times when globalization seemed to be the future. CBRE was stealing clients from us in the United States because they had an office in London where our clients wanted to buy an asset and you can understand the pressures there. You could easily have 80 studios, 120 studios, 250 studios just in the United States. What's the allure or the attraction or the need to be a global company?
Joey Gonzalez: And we will, by the way, we're already at 50, so we'll be at 80 studios within the US, probably within 2 to 3 years. I think it's really important as an organization to know who you are and what your goals are. Are you building to stay, or are you building to sell? What is it that you're building? And for me, first of all, in terms of size, it was never about being the biggest. It was always about aspiring to be the best. So we wanted top quality. Secondly, we were very focused on those four markets I described earlier. We were very focused on growing first in dense urban walking markets. And I'd say from a brand perspective, we wanted to be in places where we felt the brand would really resonate. So I remember going on record many times, maybe 15 years ago, saying things like, “Barry’s will be in Paris before we're in Kansas City.” And that's exactly how we ended up growing. And so we went from West Hollywood to New York City to London and grew this cult following, in places I think that are necessary when you're building premium products and premium brands.
Willy Walker: And does that include pop-ups in places? I know you have a studio in Southampton, but as I think about that strategy, I think about Aspen in the middle of the winter, whereas in the summertime, many people might not want to go into the Red Room. I think about the south of France and places that have a lot of activity at certain times of the year. Is there a strategy there to do pop-up studios for a certain period of time and then not have them in the off-season?
Joey Gonzalez: Yeah, and we do that regularly. It's a part of our brand strategy. In some cases, the leases I've signed in the Hamptons are ten-year leases. So those aren't necessarily pop-ups, but they're also not standard studios. And they operate with full schedules during the summer. But then, off-season, Southampton isn't even open. I think it might operate on the weekends. And Wainscott has just a very light schedule in southeast Hampton. So that's a great example of a longer-term pop-up, but we do short-term pop-ups fairly regularly. We did Aspen about a month ago. We've done Park City during Sundance. We have done Coachella. We've had a lot of talks about going to the Cannes festival. We did a Fifa last summer, talking about doing Mykonos this year. So we definitely pop up in places where we know our clients spend time while they're there.
Willy Walker: And you brought in a private equity investor in 2015. And I heard you talk about the selection process of them and that they were a PE investor who sort of had a similar outlook for the company, a similar focus on the culture and what made Barry’s unique. And things were going swimmingly from 2015 until the pandemic hit. And then, obviously, things took a significant turn. You're now back on the growth path. What does Barry's look like five to 10 years from now, Joey? And I guess more importantly, what says to Joey Gonzalez, we've done it. This has led to my dream of what I wanted to do with this company. Just one quick thing before you answer that question that most people don't know is that you hounded the owners and founders of Barry's to let you be a partner. They finally, after you kept coming back saying, “I want to invest. I want to invest.” They allowed you to invest, but they didn't make it sweat equity. And if there was any company, not a penny should have got equity would have played well. I was with Barry's, but they didn't allow you to sweat equity. You had to put a second mortgage on your home to buy in and be a partner in Barry's, which is amazing and says a lot about your conviction, the brand and the company, and your leadership style. But as you sit there today with hopefully no other pandemics on the horizon and the ability to continue to grow this with a really good PE partner. What's the size, the scale, the vision that you have as it relates to the impact Barry's is going to have?
Joey Gonzalez: So we actually hired Ellie Kay to do some analysis for us around what the global potential for Barry's is.
Willy Walker: How did you pick Ellie Kay? I have a lot of friends who work at Ellie Kay. It's not me. It's not McKinsey.
Joey Gonzalez: You're asking the wrong guy, I have no idea.
Willy Walker: You know.
Joey Gonzalez: I might interview each of the instructors, but I don't know how we picked Ellie Kay. We've worked with that for a long time. I actually think it was an NCP, a North Castle referral, because I think the first time, we used them was in 2019 or so.
Willy Walker: I digress.
Joey Gonzalez: So we worked with Ellie Kay, I believe that the number they came up with globally was around 1,500. And that's a combination of the three modalities that we discussed that are in the market today. That's Barry's run Lift, that's Barry's ride Lift, and that's Barry's Lift. For me personally. Like I said earlier, I didn't really have ambitions to be the biggest. I would like to continue to aspire to be the best. That's my goal. And I see the whitespace opportunities for Barry's to be taking the run lift product and continuing to infill in many of our top markets. For example, we only have one in Denver. So we're starting to look for our second location in Denver. We are signing Hoboken and Williamsburg, and we're getting ready to open Santa Monica in Studio City. So we're continuing to infill existing markets without over saturating, as well as identifying a lot of secondary and tertiary markets like Tampa, like Portland, like Minneapolis, places like Charlotte, where we've seen success, and we know we can replicate the model. So that's the first whitespace opportunity. And then the second whitespace opportunity is really continuing with proof of concept on ride lift and then expansion. Because I think we've proved lift works of lift. And there's so much low-hanging fruit for those two concepts. Because they don't really exist across any of our top markets. We have one lift studio in New York. We have one in LA. We have one in San Francisco. And so we have a real opportunity to scale those other modalities and to some of our primary markets, as well as think about, attaching them to our run lift product in some of our secondary markets and suburban markets. So imagine a house of three.
Willy Walker: What about the ancillary products in the sense of apparel? You and John created the fuel bar. I hadn't known that and I was doing some research on this that the two of you had, and I want to ask a question about that in a minute, but let's just hold on to John for a moment. Are those other engagements, if you will, selling apparel or selling food and all that? In the hospitality industry, as you well know Joey, once the room rate got very standardized, it was selling pay-per-view in the rooms and selling the minibar and all those little things that added up to actually create the margin in the hospitality space. My assumption is today, in your business, those are nice-to-haves, but that's not where the margins are.
Joey Gonzalez: Those are not creating margins for me.
Willy Walker: I would imagine so. Really not a whole lot there to do.
Joey Gonzalez: No, I think. So, just to back up and talk about the why behind them. The vision for Barry's was always to really be a 360 brand. And for people to be able to come to us for a variety of needs that exist outside of just can you help me work out and can you help me get fit? And when I opened Barry's Chelsea, I hadn't really talked about the history of the brand and how much we've evolved and changed and pre-miumized. When I opened Barry's Chelsea, we didn't even have locker rooms and showers at that point. So Barry's Chelsea was a big departure, locker room, showers, fuel bar, which John and I worked long and hard on, amenities partners. We've really stepped up as a brand because a lot of competitors started to enter the space. And I think what started as an offering, just to differentiate us and make us feel 360, actually ended up turning into a real business. And so our gross revenue, 15% of it, we attribute to our ancillary revenue a combination of the fuel, as well as the fashion. So it's not insignificant. It just doesn't have the same margins as the other 85% of our revenue. It's definitely something that we wouldn't deprioritize. In fact, we're investing in fuel bars. We just reimagined what it looks and feels like. We just launched and are testing a new menu in both Venice and Austin that we plan to scale. So still investing in both of those parts of the business. But they definitely didn't create a margin. It was more of a lifestyle play.
Willy Walker: And what about the personalized fitness world? Wearables. I wear a Whoop. Lots of people are wearing Oura rings these days. That whole personalized fitness, everyone. You said earlier that there's a big movement here. I just put a cold plunge and a sauna into my house and there are all sorts of things that people are changing the way that they take care of themselves. And investing in personal fitness, specifically as it relates to wearables and data. What do you think about that and how Barry’s workout, Barry’s member either engages on the data front or what that's for others to deal with. And we give the place for them to come and get their heart rate up.
Joey Gonzalez: First of all, a big fan of Whoop. We actually recently partnered with them. They were our official partner for the Find Your Strength challenge. They did some dev work.
Willy Walker: I'm an investor, Joey, so I'm really pleased that you said that. Nice shout-out. Keep going.
Joey Gonzalez: They actually did some development work to make Barry's a core activity on the Whoop app. I don't know if you knew that. So now, when you take Barry's, you can select it when you're telling your whoop what you're about to do. And I love the continuous monitoring that products like this do. I think it helps give people a baseline. I just have never been that interested in integrating something wearable and proprietary into the Barry's experience because there isn't yet something from my perspective that can really tell you what you've just done and how successfully you've done it. If your goal is to burn fat and build lean muscle tissue, you just want to track your heart rate, great. But when I have clients take a class that was the best class, I've taken all week because my calorie burn and heart rate was the highest. I always internally just roll my eyes, thinking, you have no idea how fitness works. Do you know what I mean? You're in a physique-building phase. You're not 75 pounds overweight, just playing a numbers game any longer. So anyway, that's beside the point, but I love the Whoop product. I think there are a lot of other great ones in the market. I like how people are prioritizing their overall health and wellness and that this is just a way for them to have that baseline understanding.
Willy Walker: What about taking your content and putting it on to machines? As I mentioned previously, Peloton's market cap in the midst of the pandemic was $60 billion. It's about to fall below $1 billion. It has a $1.1 billion market cap today. Clearly, it has gone from everyone thinking that it was this great content provider and that it was gonna be a media company to actually people saying they got great bikes and they're worth a million bucks because the bikes are good and people buy them. What about taking the classes, the instructors that you have so much IP in, and putting that into a trek cycle or any of the other major equipment manufacturers, are they looking to you for content?
Joey Gonzalez: I think at some point, we had half a dozen regular meetings with a lot of the aforementioned companies. A lot of that has died down. I don't think a lot of brands are investing at the moment in content, and there was never anything compelling enough for us to agree to. I'll also just tell you, that there was a moment during the pandemic when we were really harnessing that innovation value and thought very seriously about developing hardware. And when I look back at that moment, I think it probably would have destroyed the company.
Willy Walker: Oh, yeah.
Joey Gonzalez: So we didn't.
Willy Walker: Boom. Dodged that bullet. Yeah. But it's so interesting because I think of a lot of these things that it’s easy to look back on history and say, “Okay, well, that happened, and that happened.” I interviewed the Goldman Sachs chief macro strategist yesterday on the webcast. And he looks at history and talks about these cycles. And I said to him, “It's easy to look back at history” and say, “From 1980 to 2023, we had interest rates going down, down, down, down, down to the point where they got to zero and actually negative interest rates. And now we are in a wholly new environment. But it's easy to look at a 35 to 40-year history and say that all in hindsight looks easy, but it's when you were sitting there in 2001, and the World Trade Center comes down and the dot.com blow up is happening, to have the conviction that you stay in the markets and you keep moving.” And I asked him, “how do you see all that?” And I just speaking to you as an owner, and operator of a business who has to make business decisions every single day. You look back on that thing and you say, “boy, was I ever lucky not to have done that. And I've got plenty of those myself.” Sometimes it's just pure luck, and sometimes it's you were really trying to do something. I remember there were a couple of companies that I really wanted to buy, and we ended up, for whatever reason, the seller didn't. They asked for too much money. The markets turned on us. Somebody said to me that wouldn't be a good play, but whatever the case might be. I had conviction on it, could have done it, didn't do it. And then, in hindsight, it's like, thank goodness. It's just like one of those great things.
Joey Gonzalez: It really is. And it's hard, like you said, you can never know what's going to happen. And you fill your mind with all of these academic situations, you read a business case study on Netflix versus Blockbuster. And you're like, “I have to do hardware. I have to get into this game. If I don't, I'm going to be left behind.” And turns out, it would have been exactly the opposite. I think, to some extent, there's a lot you can intellectualize. And then a lot of it just has to be your heart and your gut. Like I said earlier, my lived experiences were telling me I wanted to get the hell back in those studios and that I should really be focused on that experience.
Willy Walker: Let’s switch to personal before we wind this down. I mentioned your husband, John. And I'm just curious, what's it like being in a household with co-CEOs? Most people's thoughts are that there are plenty of couples out there that each have big jobs. They gotta deal with back and forth on who's taking care of the kids. The two of you are both CEOs of your companies. You have two wonderful kids. How does the division of duties work there, with both of you having extremely big careers as well as two wonderful kids to take care of?
Joey Gonzalez: So, it's all about organizing and planning your life. John owns restaurants in Southern California, and we live in Miami. And so he has to spend, usually, at least one week out of the month in Southern California. I also travel often. I'm in LA doing meetings all week, this week. Next week, I'm in New York. The following week, John's in LA. So, it's just about for me, one of the big priorities was I don't want our kids to be left without one of us. And so, let's commit to doing our best to always organize. I'm just giving you one detail of what it's like to be in a household where you have two people with that kind of working life. And that's worked out really well for us. And we're both always very respectful, working through priorities for each of us in our career and figuring out there are some important dates or things that I need to miss and vice versa. But it's definitely not easy. It's one of the challenges, I think, of being married, which there are a lot. And it's always what you'll never not have are challenges. It's, for me, all about how you overcome them, how you approach them, and how you communicate. I'd say, being CEOs, what's great about it, is having that leadership piece. Our styles are very similar in terms of how we parent. So that's been great because there's almost always complete alignment in the way that we approach discipline, fun, expectations, scheduling all of it.
Willy Walker: And South Florida versus Southern California.
Joey Gonzalez: I spent the majority of my life here in Southern California, and I have absolutely loved every single day I have spent in Miami since then. My dad's from Cuba, so it's nice I have a lot of family there. Both my parents live there. It feels like we had a really warm welcome. We created the most special friendships at our kid's school, which didn't exist here in LA. It feels much more multicultural. I can't tell you how many languages are spoken in my kid's classroom. I love being there. I don’t miss being here at all. I miss New York City a little bit, but I don't miss Southern California.
Willy Walker: And your offices are in Miami or they're in the Design District, aren't they?
Joey Gonzalez: We're actually in Wynwood.
Willy Walker: Okay. And you've got a studio right across from the corporate offices.
Joey Gonzalez: There's the closest studios in midtown, a 3 to 5-minute drive. It's very close.
Willy Walker: It's super cool. I love what you've done with it. It's so fun to see you growing it. And if you end up having 1500 studios, that's a multi-billion dollar enterprise that you will have built, which would be really cool and engaging.
The final thing I was curious about was, how long is the average Barry client a client for. Because if 31, 65% female, my assumption would be that many of them are loyal Barry's clients. And then they might get married. They might start having kids. And the day-to-day of taking care of kids and young kids and makes it so getting to the Barry’s studio isn't that easy anymore, and that's when you lose them in the 35 to 37-year-old period, hopefully getting them to come back when they've got a little bit more time on their hands. That's a very stereotypical comment on my part as it relates to it but having a lot of young 30-ish-year-old females at Walker & Dunlop, we see that happen as it relates to where we lose people who are on a professional career, and they say, “Hey, I wanna spend more time with my kids. I'm not going to stay on this path.” Am I correct in thinking about that? And what's the average tenure of a Barry's client?
Joey Gonzalez: We actually don't have that stat.
Willy Walker: You don't. It's interesting.
Joey Gonzalez: We track our cohorts. So like the top 20 I talked about earlier, over the past five years, we have a graph that we use in our board book that tracks how many of them are staying. And our ability to retain our top 20% is really impressive. But that's really just across since I think 2019, we've been doing that.
Willy Walker: I will say that given how your studio here in Denver is run, the leadership and the camaraderie amongst the team is unbelievable. I've gone to the happy hour that you all hosted here. And when I was doing research on this and you're like, it's more than just a place to go workout. And I'm like, “Is that just words?” And then I'm, “No, it's not just words.” They're happy hours, and they're people who have tight relationships. And so it's a whole community unto itself, which is really an added aspect that you clearly don't get. I needed a pool when I was recovering from surgery to repair my hamstring. And so I joined Lifetime Fitness because they had a really good pool facility for me to be able to get in and go swim. And it's enormous. I didn't meet a single person. I didn't even know the person who checked me in. And the difference between that and going to Barry's is night and day. And I do think that there's something there that makes it so you get that stickiness of your client base, of those relationships that get created when they're at Barry's.
Joey Gonzalez: One of the things we didn't really talk about was how Barry's is the original and how Barry is a mad scientist. What he did was such a disrupter. Revolutionized fitness. There was no boutique fitness studio before Barry's. And I think that is felt today in its authenticity. And a lot of the keywords we use to describe Barry's, community, party-like environment, we've been using those words for 25 years, but all of the copycat, I guess you don't have to call them copycats, but all of the competitors that have come along trying to do HIIT in the same way we do it, or in a similar way they recycle those words and use them. But I don't always think it's authentic. And it's not to say, “our community's better.” It's just this is a real thing. Started 25 years ago. And our biggest challenge was figuring out how to take this beautiful, magical lightning in a bottle and create systems of scale to make sure that it is portable. And I hope that we've been successful in doing that.
Willy Walker: There's no doubt you wouldn't have had a Phoenix Rising after the pandemic, had you not. That was not an easy time to get through. And you obviously did exactly the right things from a leadership standpoint to hold the team together and make it through.
Joey Gonzalez: Yeah.
Willy Walker: Super cool. You've been super generous with your time. Thanks to you.
Joey Gonzalez: Thank you.
Willy Walker: Give John my best. I will see the two of you sometime soon. And if you see Yeager while you're out in California, give him my best.
Joey Gonzalez: I will. For sure.
Willy Walker: Thanks, Joey.
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