Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
When Luke Carlson spoke to Upsize in 2017 about Discover Strength, his strength training company was generating the highest revenue per square foot of any fitness concept in North America through its three Twin Cities-based locations.
After surviving — perhaps even thriving — during the COVID-19 pandemic, at least as it compares with the average big box gym, Discover Strength is ready to start expanding its footprint, both in Minnesota and beyond.
One difference between now and the last time we spoke is the growth strategy. As often happens with Carlson, an avid reader, his current plan was inspired by a book: “Franchise Your Business,” by Mark Siebert, CEO of iFranchise Group.
“I was 30 percent of the way into the book and I thought ‘This is inevitable, we’re going to franchise,’” Carlson says. “The book spoke to me so much. It was wonderfully written. I was totally inspired and knew that was the direction we needed to move.”
So, Carlson hired iFranchise Group to help work through the details.
The company has opened its first two franchise locations in Wayzata and Maple Grove and recently awarded two more, in Eden Prairie and Rochester.
Part of the future growth plan is set. The intention is to expand going forward at between 70 and 80 percent franchise-owned locations, with more than 70 expected to open in the next few years. Carlson does intend to increase his corporate-owned store count from six to 12 during that time.
“We want to keep opening our own locations because we want to make sure those locations can serve as the model to the rest of the franchise system for ‘this is the standard, this is where we should be in terms of performance in all areas of the business,’” he says.
There’s also the desire, Carlson says, to keep some skin in the game and to continue generating profits that help with the franchising plans.
“Our corporate locations are very profitable and they allow us to finance or fund our franchise growth,” he says. “It’s for those reasons we continue to do it.”
Another part of the plan is still fluid. Where the next round of locations will open, for example, is not set in stone, though it will make sense geographically. The company, Carlson says, has received interest from prospective partners across the U.S. and in other countries. But for now, geography and the ability to communicate easily with franchisees will play a role.
“That’s the stuff we’re working on,” he says. “It comes down to our philosophy on support. It’s one thing to launch a franchise, it’s another to be able to have the home office support that franchise. … That’s part of the value proposition to the franchisee.”
Additionally, he says, those who buy franchise rights are currently only being allowed to open one location. That could change, depending on their initial success, their resources and desires.
“Of our current franchisees, they all want to do multiple units,” he says. “We just want to make sure they are taking it one at a time and demonstrating success with their first unit before they are committed to multiple units.”
One thing that has not changed in the last five years is Carlson’s adherence to the company’s niche. He told Upsize in 2017 that his company wanted to be in personalized strength training what Victoria’s Secret is in the area of women’s intimate apparel.
“Bras and underwear — that’s all they do,” he said at the time. “People walk away from the Macy’s and Nordstrom and J.C. Penney and Sears and all the department stores and go to Victoria’s Secret. … We want the same thing — those large health clubs can still exist, but when you think of strength training, in our market, you only think about Discover Strength.”
If anything, after two years of pandemic-driven upheaval to the market, he feels more strongly today. When Discover Strength had to shut down for four months in 2020, Carlson spent time pondering whether he could still serve his customers in that strength training niche or if he had to change the model. Ultimately, the company conducted thousands of sessions a week through laptops and computer screens.
The company’s narrow focus provided a strategic advantage over “big box” fitness centers with many types of equipment and a less focused target market.
“When you understand your strategic niche, you can continue to serve your customers in creative ways,” he says. “The first thing we thought was how can we provide value for our consumer in our strategic niche. It wasn’t something different than what we always did. … This is exactly what we always did, so it was an easy transition for us.”
Carlson has always loved learning, whether through meeting new people or reading books. At 23, he never intended to be running his own company. At the time, he was a recent college graduate with a background in kinesiology and exercise science and he was an assistant trainer for the Minnesota Vikings.
It wasn’t until a friend recommended he look into starting a strength training boutique health club with a laser focus on the science of exercise that he first considered Discover Strength.
The idea for a one-on-one or small-group-training gym was in keeping with the societal trend away from shopping for everything at Dayton’s and he thought he could take the niche to fitness.
As Discover Strength emerges from the pandemic ready to undergo significant growth, he’s proud to have stuck to his guns. “The pandemic allowed us to live out our purpose, our core values,” he says.
His desire to maintain a quality, focused concept through the recent difficult times, he believes, will benefit the company over the long haul.
“There’s been a collective lowering of the bar. We’re very intentional about ‘we want to raise the bar,’” Carlson says. “It’s better for our customers. It’s better for recruiting staff. There are employees out there, staff out there, professionals out there, who say ‘I don’t want to be part of the lowering of the bar.’ They are going to be attracted to organizations that are consciously keeping the bar elevated. We think it’s really advantageous from a recruiting standpoint.”
