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Should you open a second martial arts school location? This question haunts ambitious school owners looking to expand their impact and income.
The path to successful expansion requires meeting several critical conditions. Your first location must be truly thriving, not just surviving. Your staffing structure needs depth beyond just one or two good instructors – you need "bench strength," a pipeline of talent ready to step up without compromising your flagship location. Never move your primary instructor or yourself to the new location.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
In our sixth episode, we asked the question should
you open a second location?
Welcome to Black Belt Banter,the best podcast to help your
martial arts school increaseprofits and generate substantial
revenue.
I'm Jimmy Hong and my co-hostis Master Tony Chung.
(00:21):
Master Tony is an accomplishedschool owner generating over $2
million annually with multiplelocations.
He also works in the film andtelevision industry as an actor,
stunt double and fight trainer.
His more recent works includeCobra, kai, will Trent, the
Tulsa King, the Naked Gun Movieand so many more.
(00:41):
Master Tony, welcome, I'm goingto put you on the spot.
What is your immediate responseif I ask you a question?
Should these school owners opena second location?
Speaker 2 (00:55):
No, don't do it.
Don't do it why.
You know what you should do.
You should buy an existinglocation.
You should make your primarylocation better.
You should consider all of thedifferent options.
I think that you know I've hadmultiple schools for a long time
now and over 10 years closer to15.
(01:17):
And I think that it's importantto obviously go through the
cost analysis and the return oninvestment and from a liability
standpoint, it just depends onwhere you are.
I speak to quite a few schoolowners for over 10 years and
they'll ask me because I haveexperience on running multiple
locations and I don't have aprimary location, they're all
(01:40):
the same.
The variance across locations,even financially and student
body-wise, it's less than 15%variation.
They're very similar across theyear.
I think that it depends on themarket that you're in.
I came to Atlanta wanting tohave the opportunity to have
multiple locations.
When I was first looking toopen martial arts schools, I had
(02:04):
spent time with GrandmasterBill Clark.
I spent some time withGrandmaster Von Schmeling seeing
some of the things.
It's incredible.
I peeked and looked at some ofthe schools Tiger Schulman's,
mma up in New York, evenChampionship Martial Arts they
actually blew up.
I think they have 200 locationsright now.
That's Frank Silverman, mikeMetzger Amazing operation.
(02:27):
Just, you don't know what you'redoing and you just sometimes do
it.
But multiple locations, youneed a great instructor and
sometimes you have to see whatthe ramifications are If you
split your team.
The quick answer is why?
And you should have multiplereasons why it should be to
create more revenue for yourself, and I know some people say I
don't open more schools for me,I just do it to create more
(02:47):
opportunity for my instructors.
What a load of hogwash, in myopinion, then, don't open a
school, just have them open aschool.
If it's about your instructor,why does it have to have your
name on it?
That's my opinion.
I think that part of the reasonwhy you open a second school is
you want to make more money offyour systems and obviously you
(03:08):
change more lives that are notaccessible to your area.
I know that in Atlanta, duringtraffic time, like most
metropolitan areas, traffic isjust impossible.
Now, if you live in an areawhere the drive time of
windshield time is 15, 18minutes, maybe 20 minutes, your
(03:28):
pulling radius could be milesand miles.
Two of my locations are lessthan two and a half miles away
from each other and totallydifferent markets.
People would not.
They can't that two and a halfmiles to drive across that side.
It'll take 30, 40 minutes.
It's impossible, it doesn't makesense and sometimes you have to
(03:49):
ask is your model replicatable?
Sometimes you have these bigfacilities and they have
multiple programs.
Maybe they have an aftercaremodel.
Your startup costs are going tobe so much different and what
happens is you have to figureout your situation.
But you should have a greatinstructor.
I would never personally takemy primary instructor from my
(04:12):
primary location and move them.
Whether that's me, whetherthat's my top right-hand
instructor master, maybe youcould move your number two and
if your number two is the, youdon't move them.
You need a three.
(04:34):
That's my opinion because itdoesn't mean it's impossible,
but it's highly improbablebecause you're going to divide
so once and never move yourself.
I found personally that Ididn't make as much money as I
did with one school until I hadmy third location.
Two schools.
I made less money and it wasn'teven time I had two schools for
years.
Why is?
Speaker 1 (04:54):
that though, why did it?
Speaker 2 (04:56):
Yeah, I made the mistake, too, of buying a school
that was it was literally anhour and 15 minutes, sometimes
an hour and a half away.
It'll happen.
You'll get a call from a friendor referral from a friend hey,
I'd like you to take over theschool.
You can just have it.
What's wrong with it?
(05:16):
And it's?
Oh no, it's just the guy'sretiring, he's tired and it's a
lease liability.
It's a liability in general.
You're going to have to staffit.
If you don't have really goodprofitability for years in your
primary location, you shouldn'teven think about your secondary
location.
Like, yeah, I'm doing startupICOs in crypto and then, if
(05:47):
they're not making any money, belike yeah, I'm doing NFTs.
If you're looking at it as agamble, you have to mitigate the
risk and I just think that youhave to really know what you're
doing.
And more literally means more.
It means more headache.
It means more opportunity.
It means more headache.
It means more opportunity.
It means more liability.
(06:07):
It means more upside and youshould try, but it'll really
test you.
Speaker 1 (06:14):
I have over the years with our network, my network.
I actually know school ownersthat reduced from multiple
locations to removed one if nottwo of their locations just
because of those issues whetherit's staffing, whether the price
arises, and they're just toospread out.
They've actually reducedinstead of expanded and they're
(06:38):
happier their.
Their life is happier right nowbecause they're doing that.
Speaker 2 (06:43):
So if you want to have a second location or go to
three or go to four, it takes aspecial breed and it takes a
little bit of luck In martialarts all these years.
You see these amazing parentsand their kids are jacked up and
then you see these bad parentsand the kid's amazing.
You're like dang, how is thatpossible?
But you also have to give yourkids a little bit of freedom and
(07:06):
a lot of responsibility, and Ithink that I've been fortunate
with staff because the amazingmasters that we have that can
literally run their own schoolsand do their own thing.
They have had some freedom, butthey are so responsible.
When I go into the schools Iapologize and I say thank you,
(07:27):
Thank you so much.
And they're like hello, GuanZheng Nim, this and that, oh no,
you're doing it all.
You guys are amazing.
So if you want to have, you haveto have a special staff person.
That maybe the overlap ofsuccession.
After a successful instructorthere's succession, Maybe
(07:47):
there's not enough, there's toomuch overlap.
So you need to make money fromyour school.
So you need to open a secondschool.
Then you need to develop athird instructor to replace them
.
You got to figure something out.
But yeah, 100% agree, Cruisecontrol is tough, Cruise control
is tough, Cruise control istough.
Speaker 1 (08:05):
100% agree that staffing is the number one
primary requirement before youopen your second location.
And don't make the mistake ofopening that second location and
thinking that you can yourstaff into that.
You got to make sure that yourstaff is already trained.
They know the game plan, theyalready have the system.
(08:31):
But you're going to get intodeep waters if, if you open that
location thinking you couldtrain them on the spot as you go
, then you're going to getheadaches from left and right.
We're not saying, we're notsaying don't open this.
We're all multi school owner.
So our answer is definitely notno, you should definitely,
definitely do it, but you shoulddo it correctly, to, to, to not
make the same mistakes asmaster Tony did, as I did or as
(08:53):
you're going to make mistakesand I know this is sound like
I'm trying to talk you out of it.
Speaker 2 (08:58):
I'm just trying to be honest.
And to open a second location,you're going to have to
systematize the things that willmaximize your primary location.
So, whether this is how I lookat it, you should build your
school as if you're going toopen a second location, even if
you don't want to.
That way, you have the healthyoption too.
So to open a second location,you can't just have one good
(09:19):
staff member, a second one, athird one.
You need a perpetual pipeline.
So that means that if I had oneschool and I had 200 students,
I would want at least 25 to 30to 50, ideally to be red belt
and above and certified firstdegrees.
I would want to have maybeenough profitability where I can
(09:43):
pay.
I have maybe enoughprofitability where I can pay
$4,000 or $5,000 a month atleast to two instructors at my
primary location, and then Ihave 10 part-timers that make a
couple hundred to $1,000 a monthworking part-time, and then I
(10:07):
have maybe 10 or 15 black beltsbehind them that are willing to
be part timers and two or threeof those part-timers are willing
and competent enough to befull-timers.
So you have to have thepipeline.
They call it a bench strength.
Your bench needs to be strongbecause it creates
accountability and thataccountability mechanism keeps
me in check.
If your full-time instructorsremind you that they can go and
(10:28):
have a school without you, it'llmake me a better present owner.
If I have part-timers that areas good as full-timers, that are
willing to step into that roleto be a full-timer, it makes my
full-timers in check.
If I have black beltinstructors that are waiting for
a part-time position to open up, it just creates healthy
(10:49):
accountability.
And you know what I've realizedin life?
The people with the most levelof accountability at times real
accountability they behave thebest.
So having that pipeline is avery important thing because
it's not as simple as a systemor a person.
You have to have an ecosystemof people, because we're a
(11:12):
service industry, and then youneed a great location.
So I've talked to quite a fewpeople recently.
Business is booming when peopleare opening up multiple
locations the second, the third,the fifth, and when they run it
by me.
Ask me my opinion, because I'lldo a search in an area and
you'll do a census search to seewhat the household income is
what the population demographicis.
(11:33):
You want to pick a location andthen you want to see what your
market is.
Generally speaking, I think themarket is conservatively two to
3% and that means that if Ihave a room of a hundred people
random hundred people and I sayhow many of you are looking to
install a pool in your yard inthe next five years, or if I say
(11:54):
how many of you are looking tobuy a car in the next 60 days,
how many of you are looking tobook a vacation in the next
month Random questions Aboutthree people will raise their
hand with any one of thosequestions.
So generally speaking, a marketfor most things is about 3%,
(12:14):
conservatively 2%.
So when I do my marketdemographics I use 2%.
So if you're in a serviceableradius of a good, decent,
healthy market and there's50,000 people in that area, the
market is 2% of 50,000 or 1,000people.
If you open a school and youbecome the 20th school, your
(12:37):
market share is 50.
And I know you have an amazingschool and you have the banners
and the decals on the wall toprove it, but at the end of the
day your market share is 50.
And for me I would not go intothat market.
It happens all the time inAtlanta.
People come here and they're ohwow, johns Creek, alpharetta,
this is a nice area.
(12:58):
Yeah, there's a bajillionschools out there and you're
just going to have a.
That's a bloody market.
You're just going to have a.
That's a bloody market.
You're just going to.
It's just it's.
You're at a nice fishing spotand there's hundreds of
fishermen.
I would rather go around thebend and find a nice spot where
it's a statistical advantage.
You could go to an area wheremaybe the market is only 15,000
people and your market shares300 and there's two schools
(13:22):
there and you open a school andyour market shares a hundred.
Even better yet maybe one.
There's two schools there andyou open a school and your
market shares 100.
Even better yet, maybe one ofthose two schools want to sell,
buy their school.
If you buy their school, yourmarket shares 150.
Plus, you have an existingstudent base.
If they have a hundred students, you could salvage 70 of them
and you might pay.
That's a whole.
Nother conversation evaluatingwhat a school is worth.
(13:43):
It's not worth what it's worthbetween what somebody will pay
for it and the actual valuation,which is based off of the
membership minus the liabilitiesand whatever assets are
transferable.
Speaker 1 (13:54):
You answered my question before even me asking
is there a market demand in thearea?
And that's how you figure outthat market demand.
Is that two to 3% of thatdemographics and market Master?
Is that correct?
A two to 3% of the demographicsand populations in that new
market?
Speaker 2 (14:12):
Yeah, I like to use conservative 2% and you could
say, okay.
So once you pick an area, yougot to find a location.
And there's, the location isokay.
What plaza are you going to bein?
I hope it's not a warehouse.
I know some people are.
I wouldn't go to a warehousepersonally, because how the heck
are they going to find you?
Most of the students that areat a martial arts school, they
(14:35):
happened upon it.
They weren't necessarilylooking for martial arts.
I don't want my sole survivingstrategy to have to pay.
Some of these companies areasking for five to $7,000 a
month to do your social media.
That's insanity To me.
That's insanity.
Oh yeah, but we use AI and wedo this auto booking system and
this and that Dude.
That's nuts, okay.
And some of them are asking forongoing monthly recurring
(14:57):
revenue, which is that's anequity partner with no liability
.
That's nuts.
But anyway, I think you have tofind a decent location.
If there's one location andit's 2000 square feet and it's
four grand and there's anotherlocation and it's 2000 square
feet and it's 7,000, some peopleare like, oh, I definitely want
to go to the $4,000 location,maybe.
(15:19):
What is your business model?
If your business model is whereyour average student value is
$200 a month.
If your average student valueis not $200 a month, it needs to
be close.
It should at least be, in myopinion.
And if you don't understandthat question, because yeah, I
charge $189.
If you charge $189 and yourbusiness model is no cash and
(15:44):
it's a 30-day cancel and yoursecond-person family add-on is
25% off and your third person is50% off, your average student
value is not $189.
Your first member is $189.
So find out what your averagestudent value is and how much is
that $3,000 difference?
If your average student valueis $200, $3,000 divided by $200
(16:08):
is an extra 15 members.
So think about that.
For a second, if one locationthat the rent is $4,000 a month
for that 2,000 square feet isnot next to any restaurants,
you're probably going to sign upthree people a month, but you
could do more.
But let's say, if you're decent, you'll sign up three students
(16:29):
a month and you do.
You go to some community events, you get some referrals, but
you'll get three students amonth on average.
You might have some monthswhere you enroll six and some
months where you enroll one ortwo, but you'll average three.
If you go to the other locationthat is 7,000 a month for 2,000
square feet and it has a subwayin it, it has a nail salon in
(16:51):
it, it has a nice Mexicanrestaurant in it, a Chinese
place, it has three or fourdifferent things and it's a nice
local restaurant where somepeople on a Friday night or
Thursday Wednesday they'llactually be a little line
outside.
Maybe it's a 15, 20 minute wait.
Those are the local dives.
You want to be in a localrestaurant plaza You'll sign up,
(17:12):
probably five, if not sixstudents, so you'll get an extra
two or three students.
So let's take that 2.5 studentsand if your attrition is 3% a
month, your 50th percentile andI know it's not perfect divided
(17:33):
by three means your average meanis about 16.67.
So let's say your averagestudent is a multiple of 12.
That extra and I know the mathis hard, but that extra 2.5
students a month it's going toyield you an extra 30 students
by the time you hit equilibrium.
And that extra 30 studentstimes $200 is an extra six grand
(17:57):
a month.
So would I pay an extra $3,000for rent to give me an extra
$6,000 of revenue all day long?
And I think that some people aretoo cheap.
Some people are too cheap inthe martial art industry because
they don't have enough money.
They shouldn't open up a schoolor a second location, not
(18:21):
because they're not talented,but because they don't have
enough money to do the rightthing.
They don't have enough money toget the right location, they
don't have enough money to firea bad employee because they're
cheap work, or they don't haveenough money to hire the right
employee because they're worthit.
It's just it's an unfortunatethe have and the have nots.
(18:42):
It's just you need about$100,000 of operating capital
after build out and I knowthat's hard, but earn it, save
it, find it, have it and thenmake the decision to build your
school that in 10 years will beyour golden goose that lays the
(19:03):
perpetual golden egg.
Speaker 1 (19:06):
You are on a roll right now, master Tony, because
you're answering questions rightbefore I was about to ask them.
Because, just to recap theanswer to the question of should
you open a second location?
Is your first location thriving?
Is your first location rocksolid with you and your staff?
And then, do you have a strongstaff?
(19:28):
Obviously you need to have astrong staff.
You cannot do it without astrong staff and a pipeline of
staff that's going to replacethem as well.
And then you discussed aboutthe market demand in the area
that two to 3%.
And then my next question isyou definitely have, you have to
(19:49):
have capital to locate to thesecond location.
You cannot siphon and you can'thave $0 in a bank siphoning off
from profits from your firstlocation to supply your second.
That's a recipe for disaster.
And you just nailed it rightthere with your answer on the
capital, and I know anotherimportant thing is and this is
what you do so great, Master,Tony is that you have a scalable
system in place.
(20:10):
So whether you're going tosecond location or fourth,
you're just implementing yoursystem.
Can you discuss a little bitabout that?
Speaker 2 (20:18):
Yeah, this is what I would recommend now that I've
learned.
If I opened a second locationit will be very close to my
other location, or if I open athird location, it'll be
somewhere close to one of myexisting locations, and I would.
There's all these apps andprograms.
Now you can map your members soyou can get all of their
address.
You can export an Excel fileand you can just plug that Excel
(20:40):
file from your CRM or fromQuickBooks or whatever you use.
Or, if you don't have it, youjust type it up on paper and
just put it in, map your membersand then look at the Google
Earth or the maps and see whatthe natural barriers are.
There might be a main highwaythat goes north and south, or a
main road that goes east andwest and you have a pocket of 30
(21:02):
, 40 members that are comingfrom south of that road or east
of that highway.
Then you want to survey thosestudents and find a good
location, ask them if they wouldbe willing to relocate, ask
them to help plant that location, and what I do is I started
with my Smyrna location and Igot to a point where I had a
(21:25):
waiting list on half of myclasses and the mistake that I
made up for when I eventuallyopened my fourth location and
the third location.
I'm sorry.
I moved 40 members to plantthat school, because if you
start a new school and you haveno members, it's very difficult,
right difficult to get momentum.
Because if you go to arestaurant and it's empty,
what's wrong with this place?
It's oh, we're new.
(21:45):
Or our other location is there,oh, that's the location I want
to go to and that's why we don'twant to go there.
We want to be far away.
This is what you do.
In my opinion, your primarylocation, you have a target.
I would rather have arestaurant that has too much of
a weight, that people leave andit's a hole in the wall.
And then I opened anotherlocation and I asked some of
(22:07):
those customers to move.
Then, if I have a bigrestaurant and it's empty
sometimes it's full, but anaverage part of the time it's
20% empty Dude, I think that youneed to have a model where
you're almost overflowing 30% ofthe time.
Do you have a wait list?
A true wait list, not a lie,not a sales gimmick.
(22:29):
A true wait list, because youneed to know what your targets
are.
Some people have no targets, Ican't point to the ocean and say
, swim.
Most reasonable people would belike, okay, how far do I go?
What do I get?
How fast do I need to do it?
And people need some metrics.
Every great sports personwatches the score and the clock,
so you have to have isolatedtargets.
(22:55):
So when your primary location istruly busy and you have a wait
list and it makes sense and youmap your members, you find a
location that's drivable.
I like having close locationbecause we can overlap resources
.
My part-time staff can go backand forth.
I never move my full-time staffunless I absolutely have to.
(23:15):
My part-time staff, though, cango back and forth between
locations because it's drivableand I can move students to plant
that new location.
It will save you time.
My part-time staff, though, cango back and forth between
locations because it's drivableand I can move students to plant
that new location.
It will save you time.
Speaker 1 (23:29):
Going from zero to 50 is harder, in my opinion, than
going from 50 to 150.
If you know what you're doingFascinating I didn't even think
about that is having that secondlocation close instead of far
away in a new market to overlapresources.
Brilliant, brilliant.
Speaker 2 (23:42):
Oh, I need to make sure I attach my Venmo or my
Zelle so you guys can, for thepeople listening, so you can
send me some money for the greatadvice that cost me hundreds of
thousands of dollars over theyears to lose.
It's such pain.
As the best teacher, you knowhow it feels to open up a school
with zero students that isliterally an hour and a half,
(24:04):
two hours away.
It's, it is painful, years andhundreds of thousands of dollars
of loss to discover andappreciate.
So, having said that, sometimesmy kids need to burn their hand
on the stove, unfortunately, orget sunburned on the soccer
field, even when I warn them.
So if you're feeling the pain,don't feel, dumb man.
(24:27):
I have been kicking myself inthe butt, but that pain has
served me well and it's okay.
It's okay.
Speaker 1 (24:38):
There's a question I wanted to ask you.
You've discussed multiple timesabout the average student value
.
Can you explain what exactly isthis average student value and
what's the formula for this?
Speaker 2 (24:51):
Yeah, absolutely.
You take your gross revenuesfor the month and you divide by
the number of students thatyou're serving and in order for
it to be apples to apples, youjust have to be consistent.
You don't have to be comparablyconsistent.
For me, when I track myenrollments, I track my
enrollments by contracts.
I don't count.
(25:11):
So it could be one school gotseven contracts or seven
agreements.
That could be seven families ofthree, that could be seven
individuals.
It doesn't matter.
Because they joined together,they quit together.
They joined singly, they quitsingly.
When it comes to averagestudent value, you can use your
active student count of peoplethat are actively training.
You can do your contractedstudent count and usually your
(25:34):
active is around 70, 80% of yourtotal count.
But whatever you use itconsistently, the hard thing is
some of you have models whereyou're monthly and you allow
freezes and summer's coming up.
I don't know when this podcastis going to come out, but if
you're in the middle of summer,if you've experienced summer and
you offer that, you just haveto keep that in mind.
So when your revenue shrink,you're only going to count your
(25:58):
active members for your averagestudent value, because your
frozen members aren't paying, sothey shouldn't count against
your gross for calculating youraverage student value.
But just so you guys understand, your average student value
doesn't have to be when I say itneeds to be so it should be.
(26:20):
It just depends.
If my average student, forexample, is paying $200 a month
average student value and 75% ofthose members are coming once a
week If you heard the lastpodcast, last episode of mine we
talked about up to Red Beltthey can only come once a week.
So that affects the frequencybecause it comes down to what
(26:41):
your floor plan is.
Let's say you have a 2,000square foot school and I think
the biggest mistake a lot ofschools make is their mat is too
big and their lobby is toosmall.
I think that you have to have amodel planned out For me.
I need a minimum of 800 squarefeet for my mat.
I'd like to have 1,200 squarefeet or more, but I don't need
(27:03):
more than 800.
I know that sounds crazy,because my average class is 10.
For my model to work whichmeans because I have a flex
schedule again referred to thelast episode flex schedule means
that I allow them to go towhatever class they want in the
week.
They have five options.
Flex schedule means that Iallow them to go to whatever
class they want in the week.
They have five options.
So if my model says I have anaverage of 10 for that class to
(27:24):
stay open and be maximized, someclasses might have six during
the week and that slot.
Some classes might have 16, butit will average around 10 or so
.
It could have five or 15.
It'll average 10.
So one instructor teaching 10kids.
I personally don't enjoyteaching more than a dozen
(27:45):
people.
There was a time where at myprimary location, when I was
building the model out, I hadback-to-back classes of 24 to 30
kids and you feel successful,you are successful, but it felt
like a prison to me.
There is no way in heckanybody's going to teach what
I'm doing right now for what I'mwilling to pay them no way.
(28:06):
So I had to change the modeland when I went to once a week
it made all the classes go from24 to 30 to 12 to 15,
essentially because you'recoming less and then you just
play with it.
Essentially because you'recoming less and then you just
play with it.
So, whatever your model is, Ithink your original question was
(28:28):
based off of your averagestudent value.
You just have to have a target.
Your average student valueaffects your gross because your
limiting factor is you can'thave a hundred classes a day,
depending on your class timeslots.
Some people do 30 minuteclasses, 40 minute classes, I do
45s.
I'd like to get to the pointwhere I offer a 75 minute class
for some classes.
So, depending on however manyclasses if you're having four or
five, six, some schools haveeight classes a day Look at your
(28:51):
floor size.
Ask yourself how many people doyou want to teach.
If you want to just have oneschool and you want to teach
till the day you die, then youcan maximize.
I could fit 50 people on thefloor, 100 people on the floor.
But if you want a system thathas an instructor that will be
an inferior teacher to you attimes because they're not the
(29:14):
owner, they don't care, theytypically are not going to be as
vested then you need to have asystem that will work with less
factors or less components.
But to answer your question,average student value matters,
but it matters in relation tothe other metrics.
So I know that I answered yourquestion.
(29:35):
That brought more questions.
Speaker 1 (29:37):
Yes, because my next question then is what that
number of average student value?
Let's say that number is 200.
What?
How do you use that number toyour system?
Speaker 2 (29:50):
Okay, so for me, I had the school.
This is I'm going to speak ofthe current model that we're
doing that I came up with 15years ago.
You want 250 people paying $200a month, so you're doing
$600,000 a year as a elite levelschool.
So, to me, year one you do 120,year two you do 240, year three
(30:12):
360, year four, 480.
And you live.
It depends on who's running theschool.
You know what I found Once youhave solid locations, solid
layouts, it all depends on thequality of staff and it's not
about how good they are at salesand marketing.
It is a combination of salesand marketing acumen.
(30:33):
But really, how awesome arethey as a teacher?
How great are they atdeveloping a good culture of
black belts?
You just need 200 wonderfulpeople.
You need 200 families.
Speaker 1 (30:49):
Because you are zigging when everybody is
zagging.
You have mega school owners,multiple school owners, big
seven to 12,000 square footschool owners trying to just
maximize student active studentcount.
Get them.
They love that high energy of30 to 40 kids in a classroom
just packed with staff and themon the floor.
(31:10):
But you are, you're going.
You're going against the grainis what I'm looking for, the
words I'm looking for.
You want to teach eight to 12students quality instructions
and you're limiting them to comeonce a week because you don't
want to overfill your class of800, 1,000 square foot, small
school location size and I thinkour listeners are more on your
(31:35):
situation than the mega schoolowners.
They do have 1,800 square foot,they do have smaller square
footage and they're trying toget to we went over this trying
to break that 100 student activecount mark and they just can't
do it.
They can't.
They're stuck at 80, they'restuck at 70, and they can't
break that 100 student mark.
You're saying that you don'tneed to have a big school with
(31:57):
30 students.
You can make it and achievethat high grossing revenue with
the smaller schools and set up.
Speaker 2 (32:06):
Yeah, for me, the reason we have contracts at my
school there's multiple reasons.
Obviously it's because you wantthem to commit, but I don't
want a lot of flux in theclasses.
I don't want there to be a waveof people coming in, going out,
coming in, going out.
I want to teach these students.
(32:28):
I want my instructors to reallymove them up.
And imagine if schools rightand I'm not even talking about
Harvard, yale, oxford, I'mtalking about elementary schools
Imagine if these schoolteachers that have 20, 30 kids
in a class and they're teachingthem nine months out of the year
, imagine if kids could changeschools or just stop randomly
(32:52):
and how the heck is the teachersupposed to teach them?
It's already hard enough.
It's crazy.
And I've been there where my dadhas this massive 10,000 square
foot school with five acres.
Do you know how long it takesme to cut the grass?
When I was younger and my dadwas old school, he wanted a push
lawnmower.
Literally, by the time I wouldhave to mow the lawn or do some
kind of edging or hedging orpulling weeds.
(33:15):
Every day.
You're doing something with afive acre property.
We had indoor, outdoor trainingand he had two floors, showers,
all that, foot baths in thefront.
It's amazing and everyone'salways impressed.
Yes, there was a season wheremy father had hundreds and
hundreds and hundreds ofstudents never a thousand, but
hundreds and hundreds ofstudents, but then average.
(33:36):
After we built the school andafter we had the momentum and
then my dad opened some branchschools, that school had 120 to
150 schools students and it'snot uncommon.
I have seen dozens.
I travel right, and I used totravel for Macho, I've traveled
for you know tournaments and youto go see.
(33:56):
I just go see people and I seethese big, massive schools and
when they tell me that they have300 students and I'm not dumb,
I can look around, I look at acouple of classes this school's
got 120 students right now andthen they're like, yeah, it's a
little slow right now, and theyshow me some pictures and some
videos and, yeah, I believe thatthey had six 800 students at
(34:17):
one point.
I would rather have arestaurant that is almost always
packed and I have a season ofcouple years where I could have
served hundreds and hundreds ofmore customers, but I chose not
to, because when you own abusiness, it is not for a year
or a four-year period, it's fordecades ideally, legacy.
(34:41):
If you own a business, anacademy, for decades, you need
perpetual, sustainable,reoccurring success.
I would rather turn away threegolden years of money and not be
empty.
And I'm not saying all schoolsare like that, because I have
seen some schools that are bigand they stayed big.
(35:02):
But if you think that a bigschool is the answer, it's a
headache.
It is a headache.
You know how long it took toclean my dad's school had eight
bathrooms.
It's not glorious, it's verytough.
It took just to mop the school.
It took two hours.
It's not easy.
So, having said that, myschools are 2000 square foot,
(35:28):
one person can clean the entireschool in 30 minutes.
Speaker 1 (35:30):
That's amazing.
A lot of times that's you,pastor Tony.
Speaker 2 (35:32):
Oh yeah, whenever I go to the schools, sometimes
I'll just clean because there'snothing else to do, because if
you have good systems and youhave great staff that runs those
systems, you're just there tohelp.
You're just there to help.
And yes, so the beauty of itand I know that this
conversation has peaked andtrowed don't open a second
school.
Open a second school.
It's amazing.
(35:52):
Don't open a second school.
Open a second school.
It's amazing, it's horrible.
It could be whatever you wantit to be, but it needs to be
accurate to what your target is.
I don't want you to just fallinto it because you're like, oh
yeah, just I'll try it out whenyou find the right location.
It is a half a million dollarsof liability and a lot of these
new plazas that you're going towant to get into.
(36:13):
They may be owned by a realestate investment trust.
It's much different than it was5, 10, 15 years ago.
They're going to ask you forpersonal guarantees that not
only you have to sign but yourwife has to sign.
They're going to ask you forsoundproofing right, because
they're a little more keen onmartial arts schools and
adjacent noise and soundproofwall installation is very costly
(36:36):
and it's going to eat some ofyour square footage and it's
going to be it's going to beexpensive.
This is going to be expensive.
There's going to be some ofthese.
I'm in the process of openinganother location right now and
talking about the difficultiesof opening another location.
Speaker 1 (36:50):
Yeah, and I didn't want to say this that you said
this first, Master Tony.
But listeners, Master Tony isliterally opening up another
location right now.
Know that.
Speaker 2 (36:59):
Yes, and so, having said that, this location is a
Publix Plaza and the owner ofthe location is a real estate
investment trust and they havethousands of properties across
the US and just in Georgia Ithink they have 100 properties.
So the way the lease readinitially is a template.
They could literally move menot just within the plaza at
(37:22):
their choice.
You can move a tenant to adifferent bay.
That's comparable.
They could move me to adifferent plaza and oh,
absolutely not, you can't moveme to a different city just
because you decide to sell theplaza or something like that and
you want to maintain your rentroll.
So you know you're going toneed to have the cash to get
into these plazas and also topay an attorney for 50 an hour
(37:45):
or whatever to review the 10,take 10 hours to review the
lease with you and to iron itback and forth with the leasing
company.
But just be have the rightamount of funding and make sure
that you are properly insured.
But and I know it's hard butmost businesses like a
restaurant and if you look at,if you look at franchises, if
(38:08):
you're just opening a regularKumon or a code Ninja or
whatever, they want hundreds ofthousands of dollars to be there
for you to operate the business, because you need operating
capital, not just startupcapital.
Something to think about andI've been there because, mind
you, some of you heard me say itbefore when I got started, I
(38:29):
went $100,000 in credit carddebt just trying to open and get
my school started, and my firstschool was 1600 square feet.
It felt like 1200 square feet.
It's possible, but the key isto drive solid value and to
charge what you're worth and tomake sure that metric makes
sense with something that has ascalable vertical and then, as
(38:53):
that vertical is successful,then you could start spreading
out laterally and open it, butthen use some of your primary
vertical to plant the nextlocation that's what I think is
best and try not to move yourprimary instructor or yourself.
Speaker 1 (39:07):
So here is the definitive.
All right, listeners, here'sthe definitive answer to the
question Should you open asecond location?
And that answer is yes, but youneed to make sure your primary
location is thriving, is doingrock solid.
You need to have an awesomestaff with pipeline of
(39:31):
additional staff in place.
You got to know your marketdemand in this new area and you
have to have capital.
Don't siphon off from your onlylocation for this as you
ongoing.
You have to have capital, saveup.
If not, do not do it.
And lastly, is your systemscalable?
(39:52):
Master Tony, thank you forjoining us.
We'll conclude here.
If you are enjoying our show,go ahead and rate and review our
podcast or YouTube channel.
Our goal is to make our show assuccessful as possible and your
review will help achieve that.
Have a great week.
I look forward to our nextepisode.
In our sixth episode, we asked the question should
you open a second location?
Welcome to Black Belt Banter,the best podcast to help your
martial arts school increaseprofits and generate substantial
revenue.
I'm Jimmy Hong and my co-hostis Master Tony Chung.
(00:21):
Master Tony is an accomplishedschool owner generating over $2
million annually with multiplelocations.
He also works in the film andtelevision industry as an actor,
stunt double and fight trainer.
His more recent works includeCobra, kai, will Trent, the
Tulsa King, the Naked Gun Movieand so many more.
(00:41):
Master Tony, welcome, I'm goingto put you on the spot.
What is your immediate responseif I ask you a question?
Should these school owners opena second location?
Speaker 2 (00:55):
No, don't do it.
Don't do it why.
You know what you should do.
You should buy an existinglocation.
You should make your primarylocation better.
You should consider all of thedifferent options.
I think that you know I've hadmultiple schools for a long time
now and over 10 years closer to15.
(01:17):
And I think that it's importantto obviously go through the
cost analysis and the return oninvestment and from a liability
standpoint, it just depends onwhere you are.
I speak to quite a few schoolowners for over 10 years and
they'll ask me because I haveexperience on running multiple
locations and I don't have aprimary location, they're all
(01:40):
the same.
The variance across locations,even financially and student
body-wise, it's less than 15%variation.
They're very similar across theyear.
I think that it depends on themarket that you're in.
I came to Atlanta wanting tohave the opportunity to have
multiple locations.
When I was first looking toopen martial arts schools, I had
(02:04):
spent time with GrandmasterBill Clark.
I spent some time withGrandmaster Von Schmeling seeing
some of the things.
It's incredible.
I peeked and looked at some ofthe schools Tiger Schulman's,
mma up in New York, evenChampionship Martial Arts they
actually blew up.
I think they have 200 locationsright now.
That's Frank Silverman, mikeMetzger Amazing operation.
(02:27):
Just, you don't know what you'redoing and you just sometimes do
it.
But multiple locations, youneed a great instructor and
sometimes you have to see whatthe ramifications are If you
split your team.
The quick answer is why?
And you should have multiplereasons why it should be to
create more revenue for yourself, and I know some people say I
don't open more schools for me,I just do it to create more
(02:47):
opportunity for my instructors.
What a load of hogwash, in myopinion, then, don't open a
school, just have them open aschool.
If it's about your instructor,why does it have to have your
name on it?
That's my opinion.
I think that part of the reasonwhy you open a second school is
you want to make more money offyour systems and obviously you
(03:08):
change more lives that are notaccessible to your area.
I know that in Atlanta, duringtraffic time, like most
metropolitan areas, traffic isjust impossible.
Now, if you live in an areawhere the drive time of
windshield time is 15, 18minutes, maybe 20 minutes, your
(03:28):
pulling radius could be milesand miles.
Two of my locations are lessthan two and a half miles away
from each other and totallydifferent markets.
People would not.
They can't that two and a halfmiles to drive across that side.
It'll take 30, 40 minutes.
It's impossible, it doesn't makesense and sometimes you have to
(03:49):
ask is your model replicatable?
Sometimes you have these bigfacilities and they have
multiple programs.
Maybe they have an aftercaremodel.
Your startup costs are going tobe so much different and what
happens is you have to figureout your situation.
But you should have a greatinstructor.
I would never personally takemy primary instructor from my
(04:12):
primary location and move them.
Whether that's me, whetherthat's my top right-hand
instructor master, maybe youcould move your number two and
if your number two is the, youdon't move them.
You need a three.
(04:34):
That's my opinion because itdoesn't mean it's impossible,
but it's highly improbablebecause you're going to divide
so once and never move yourself.
I found personally that Ididn't make as much money as I
did with one school until I hadmy third location.
Two schools.
I made less money and it wasn'teven time I had two schools for
years.
Why is?
Speaker 1 (04:54):
that though, why did it?
Speaker 2 (04:56):
Yeah, I made the mistake, too, of buying a school
that was it was literally anhour and 15 minutes, sometimes
an hour and a half away.
It'll happen.
You'll get a call from a friendor referral from a friend hey,
I'd like you to take over theschool.
You can just have it.
What's wrong with it?
(05:16):
And it's?
Oh no, it's just the guy'sretiring, he's tired and it's a
lease liability.
It's a liability in general.
You're going to have to staffit.
If you don't have really goodprofitability for years in your
primary location, you shouldn'teven think about your secondary
location.
Like, yeah, I'm doing startupICOs in crypto and then, if
(05:47):
they're not making any money, belike yeah, I'm doing NFTs.
If you're looking at it as agamble, you have to mitigate the
risk and I just think that youhave to really know what you're
doing.
And more literally means more.
It means more headache.
It means more opportunity.
It means more headache.
It means more opportunity.
It means more liability.
(06:07):
It means more upside and youshould try, but it'll really
test you.
Speaker 1 (06:14):
I have over the years with our network, my network.
I actually know school ownersthat reduced from multiple
locations to removed one if nottwo of their locations just
because of those issues whetherit's staffing, whether the price
arises, and they're just toospread out.
They've actually reducedinstead of expanded and they're
(06:38):
happier their.
Their life is happier right nowbecause they're doing that.
Speaker 2 (06:43):
So if you want to have a second location or go to
three or go to four, it takes aspecial breed and it takes a
little bit of luck In martialarts all these years.
You see these amazing parentsand their kids are jacked up and
then you see these bad parentsand the kid's amazing.
You're like dang, how is thatpossible?
But you also have to give yourkids a little bit of freedom and
(07:06):
a lot of responsibility, and Ithink that I've been fortunate
with staff because the amazingmasters that we have that can
literally run their own schoolsand do their own thing.
They have had some freedom, butthey are so responsible.
When I go into the schools Iapologize and I say thank you,
(07:27):
Thank you so much.
And they're like hello, GuanZheng Nim, this and that, oh no,
you're doing it all.
You guys are amazing.
So if you want to have, you haveto have a special staff person.
That maybe the overlap ofsuccession.
After a successful instructorthere's succession, Maybe
(07:47):
there's not enough, there's toomuch overlap.
So you need to make money fromyour school.
So you need to open a secondschool.
Then you need to develop athird instructor to replace them
.
You got to figure something out.
But yeah, 100% agree, Cruisecontrol is tough, Cruise control
is tough, Cruise control istough.
Speaker 1 (08:05):
100% agree that staffing is the number one
primary requirement before youopen your second location.
And don't make the mistake ofopening that second location and
thinking that you can yourstaff into that.
You got to make sure that yourstaff is already trained.
They know the game plan, theyalready have the system.
(08:31):
But you're going to get intodeep waters if, if you open that
location thinking you couldtrain them on the spot as you go
, then you're going to getheadaches from left and right.
We're not saying, we're notsaying don't open this.
We're all multi school owner.
So our answer is definitely notno, you should definitely,
definitely do it, but you shoulddo it correctly, to, to, to not
make the same mistakes asmaster Tony did, as I did or as
(08:53):
you're going to make mistakesand I know this is sound like
I'm trying to talk you out of it.
Speaker 2 (08:58):
I'm just trying to be honest.
And to open a second location,you're going to have to
systematize the things that willmaximize your primary location.
So, whether this is how I lookat it, you should build your
school as if you're going toopen a second location, even if
you don't want to.
That way, you have the healthyoption too.
So to open a second location,you can't just have one good
(09:19):
staff member, a second one, athird one.
You need a perpetual pipeline.
So that means that if I had oneschool and I had 200 students,
I would want at least 25 to 30to 50, ideally to be red belt
and above and certified firstdegrees.
I would want to have maybeenough profitability where I can
(09:43):
pay.
I have maybe enoughprofitability where I can pay
$4,000 or $5,000 a month atleast to two instructors at my
primary location, and then Ihave 10 part-timers that make a
couple hundred to $1,000 a monthworking part-time, and then I
(10:07):
have maybe 10 or 15 black beltsbehind them that are willing to
be part timers and two or threeof those part-timers are willing
and competent enough to befull-timers.
So you have to have thepipeline.
They call it a bench strength.
Your bench needs to be strongbecause it creates
accountability and thataccountability mechanism keeps
me in check.
If your full-time instructorsremind you that they can go and
(10:28):
have a school without you, it'llmake me a better present owner.
If I have part-timers that areas good as full-timers, that are
willing to step into that roleto be a full-timer, it makes my
full-timers in check.
If I have black beltinstructors that are waiting for
a part-time position to open up, it just creates healthy
(10:49):
accountability.
And you know what I've realizedin life?
The people with the most levelof accountability at times real
accountability they behave thebest.
So having that pipeline is avery important thing because
it's not as simple as a systemor a person.
You have to have an ecosystemof people, because we're a
(11:12):
service industry, and then youneed a great location.
So I've talked to quite a fewpeople recently.
Business is booming when peopleare opening up multiple
locations the second, the third,the fifth, and when they run it
by me.
Ask me my opinion, because I'lldo a search in an area and
you'll do a census search to seewhat the household income is
what the population demographicis.
(11:33):
You want to pick a location andthen you want to see what your
market is.
Generally speaking, I think themarket is conservatively two to
3% and that means that if Ihave a room of a hundred people
random hundred people and I sayhow many of you are looking to
install a pool in your yard inthe next five years, or if I say
(11:54):
how many of you are looking tobuy a car in the next 60 days,
how many of you are looking tobook a vacation in the next
month Random questions Aboutthree people will raise their
hand with any one of thosequestions.
So generally speaking, a marketfor most things is about 3%,
(12:14):
conservatively 2%.
So when I do my marketdemographics I use 2%.
So if you're in a serviceableradius of a good, decent,
healthy market and there's50,000 people in that area, the
market is 2% of 50,000 or 1,000people.
If you open a school and youbecome the 20th school, your
(12:37):
market share is 50.
And I know you have an amazingschool and you have the banners
and the decals on the wall toprove it, but at the end of the
day your market share is 50.
And for me I would not go intothat market.
It happens all the time inAtlanta.
People come here and they're ohwow, johns Creek, alpharetta,
this is a nice area.
(12:58):
Yeah, there's a bajillionschools out there and you're
just going to have a.
That's a bloody market.
You're just going to have a.
That's a bloody market.
You're just going to.
It's just it's.
You're at a nice fishing spotand there's hundreds of
fishermen.
I would rather go around thebend and find a nice spot where
it's a statistical advantage.
You could go to an area wheremaybe the market is only 15,000
people and your market shares300 and there's two schools
(13:22):
there and you open a school andyour market shares a hundred.
Even better yet maybe one.
There's two schools there andyou open a school and your
market shares 100.
Even better yet, maybe one ofthose two schools want to sell,
buy their school.
If you buy their school, yourmarket shares 150.
Plus, you have an existingstudent base.
If they have a hundred students, you could salvage 70 of them
and you might pay.
That's a whole.
Nother conversation evaluatingwhat a school is worth.
(13:43):
It's not worth what it's worthbetween what somebody will pay
for it and the actual valuation,which is based off of the
membership minus the liabilitiesand whatever assets are
transferable.
Speaker 1 (13:54):
You answered my question before even me asking
is there a market demand in thearea?
And that's how you figure outthat market demand.
Is that two to 3% of thatdemographics and market Master?
Is that correct?
A two to 3% of the demographicsand populations in that new
market?
Speaker 2 (14:12):
Yeah, I like to use conservative 2% and you could
say, okay.
So once you pick an area, yougot to find a location.
And there's, the location isokay.
What plaza are you going to bein?
I hope it's not a warehouse.
I know some people are.
I wouldn't go to a warehousepersonally, because how the heck
are they going to find you?
Most of the students that areat a martial arts school, they
(14:35):
happened upon it.
They weren't necessarilylooking for martial arts.
I don't want my sole survivingstrategy to have to pay.
Some of these companies areasking for five to $7,000 a
month to do your social media.
That's insanity To me.
That's insanity.
Oh yeah, but we use AI and wedo this auto booking system and
this and that Dude.
That's nuts, okay.
And some of them are asking forongoing monthly recurring
(14:57):
revenue, which is that's anequity partner with no liability
.
That's nuts.
But anyway, I think you have tofind a decent location.
If there's one location andit's 2000 square feet and it's
four grand and there's anotherlocation and it's 2000 square
feet and it's 7,000, some peopleare like, oh, I definitely want
to go to the $4,000 location,maybe.
(15:19):
What is your business model?
If your business model is whereyour average student value is
$200 a month.
If your average student valueis not $200 a month, it needs to
be close.
It should at least be, in myopinion.
And if you don't understandthat question, because yeah, I
charge $189.
If you charge $189 and yourbusiness model is no cash and
(15:44):
it's a 30-day cancel and yoursecond-person family add-on is
25% off and your third person is50% off, your average student
value is not $189.
Your first member is $189.
So find out what your averagestudent value is and how much is
that $3,000 difference?
If your average student valueis $200, $3,000 divided by $200
(16:08):
is an extra 15 members.
So think about that.
For a second, if one locationthat the rent is $4,000 a month
for that 2,000 square feet isnot next to any restaurants,
you're probably going to sign upthree people a month, but you
could do more.
But let's say, if you're decent, you'll sign up three students
(16:29):
a month and you do.
You go to some community events, you get some referrals, but
you'll get three students amonth on average.
You might have some monthswhere you enroll six and some
months where you enroll one ortwo, but you'll average three.
If you go to the other locationthat is 7,000 a month for 2,000
square feet and it has a subwayin it, it has a nail salon in
(16:51):
it, it has a nice Mexicanrestaurant in it, a Chinese
place, it has three or fourdifferent things and it's a nice
local restaurant where somepeople on a Friday night or
Thursday Wednesday they'llactually be a little line
outside.
Maybe it's a 15, 20 minute wait.
Those are the local dives.
You want to be in a localrestaurant plaza You'll sign up,
(17:12):
probably five, if not sixstudents, so you'll get an extra
two or three students.
So let's take that 2.5 studentsand if your attrition is 3% a
month, your 50th percentile andI know it's not perfect divided
(17:33):
by three means your average meanis about 16.67.
So let's say your averagestudent is a multiple of 12.
That extra and I know the mathis hard, but that extra 2.5
students a month it's going toyield you an extra 30 students
by the time you hit equilibrium.
And that extra 30 studentstimes $200 is an extra six grand
(17:57):
a month.
So would I pay an extra $3,000for rent to give me an extra
$6,000 of revenue all day long?
And I think that some people aretoo cheap.
Some people are too cheap inthe martial art industry because
they don't have enough money.
They shouldn't open up a schoolor a second location, not
(18:21):
because they're not talented,but because they don't have
enough money to do the rightthing.
They don't have enough money toget the right location, they
don't have enough money to firea bad employee because they're
cheap work, or they don't haveenough money to hire the right
employee because they're worthit.
It's just it's an unfortunatethe have and the have nots.
(18:42):
It's just you need about$100,000 of operating capital
after build out and I knowthat's hard, but earn it, save
it, find it, have it and thenmake the decision to build your
school that in 10 years will beyour golden goose that lays the
(19:03):
perpetual golden egg.
Speaker 1 (19:06):
You are on a roll right now, master Tony, because
you're answering questions rightbefore I was about to ask them.
Because, just to recap theanswer to the question of should
you open a second location?
Is your first location thriving?
Is your first location rocksolid with you and your staff?
And then, do you have a strongstaff?
(19:28):
Obviously you need to have astrong staff.
You cannot do it without astrong staff and a pipeline of
staff that's going to replacethem as well.
And then you discussed aboutthe market demand in the area
that two to 3%.
And then my next question isyou definitely have, you have to
(19:49):
have capital to locate to thesecond location.
You cannot siphon and you can'thave $0 in a bank siphoning off
from profits from your firstlocation to supply your second.
That's a recipe for disaster.
And you just nailed it rightthere with your answer on the
capital, and I know anotherimportant thing is and this is
what you do so great, Master,Tony is that you have a scalable
system in place.
(20:10):
So whether you're going tosecond location or fourth,
you're just implementing yoursystem.
Can you discuss a little bitabout that?
Speaker 2 (20:18):
Yeah, this is what I would recommend now that I've
learned.
If I opened a second locationit will be very close to my
other location, or if I open athird location, it'll be
somewhere close to one of myexisting locations, and I would.
There's all these apps andprograms.
Now you can map your members soyou can get all of their
address.
You can export an Excel fileand you can just plug that Excel
(20:40):
file from your CRM or fromQuickBooks or whatever you use.
Or, if you don't have it, youjust type it up on paper and
just put it in, map your membersand then look at the Google
Earth or the maps and see whatthe natural barriers are.
There might be a main highwaythat goes north and south, or a
main road that goes east andwest and you have a pocket of 30
(21:02):
, 40 members that are comingfrom south of that road or east
of that highway.
Then you want to survey thosestudents and find a good
location, ask them if they wouldbe willing to relocate, ask
them to help plant that location, and what I do is I started
with my Smyrna location and Igot to a point where I had a
(21:25):
waiting list on half of myclasses and the mistake that I
made up for when I eventuallyopened my fourth location and
the third location.
I'm sorry.
I moved 40 members to plantthat school, because if you
start a new school and you haveno members, it's very difficult,
right difficult to get momentum.
Because if you go to arestaurant and it's empty,
what's wrong with this place?
It's oh, we're new.
(21:45):
Or our other location is there,oh, that's the location I want
to go to and that's why we don'twant to go there.
We want to be far away.
This is what you do.
In my opinion, your primarylocation, you have a target.
I would rather have arestaurant that has too much of
a weight, that people leave andit's a hole in the wall.
And then I opened anotherlocation and I asked some of
(22:07):
those customers to move.
Then, if I have a bigrestaurant and it's empty
sometimes it's full, but anaverage part of the time it's
20% empty Dude, I think that youneed to have a model where
you're almost overflowing 30% ofthe time.
Do you have a wait list?
A true wait list, not a lie,not a sales gimmick.
(22:29):
A true wait list, because youneed to know what your targets
are.
Some people have no targets, Ican't point to the ocean and say
, swim.
Most reasonable people would belike, okay, how far do I go?
What do I get?
How fast do I need to do it?
And people need some metrics.
Every great sports personwatches the score and the clock,
so you have to have isolatedtargets.
(22:55):
So when your primary location istruly busy and you have a wait
list and it makes sense and youmap your members, you find a
location that's drivable.
I like having close locationbecause we can overlap resources
.
My part-time staff can go backand forth.
I never move my full-time staffunless I absolutely have to.
(23:15):
My part-time staff, though, cango back and forth between
locations because it's drivableand I can move students to plant
that new location.
It will save you time.
My part-time staff, though, cango back and forth between
locations because it's drivableand I can move students to plant
that new location.
It will save you time.
Speaker 1 (23:29):
Going from zero to 50 is harder, in my opinion, than
going from 50 to 150.
If you know what you're doingFascinating I didn't even think
about that is having that secondlocation close instead of far
away in a new market to overlapresources.
Brilliant, brilliant.
Speaker 2 (23:42):
Oh, I need to make sure I attach my Venmo or my
Zelle so you guys can, for thepeople listening, so you can
send me some money for the greatadvice that cost me hundreds of
thousands of dollars over theyears to lose.
It's such pain.
As the best teacher, you knowhow it feels to open up a school
with zero students that isliterally an hour and a half,
(24:04):
two hours away.
It's, it is painful, years andhundreds of thousands of dollars
of loss to discover andappreciate.
So, having said that, sometimesmy kids need to burn their hand
on the stove, unfortunately, orget sunburned on the soccer
field, even when I warn them.
So if you're feeling the pain,don't feel, dumb man.
(24:27):
I have been kicking myself inthe butt, but that pain has
served me well and it's okay.
It's okay.
Speaker 1 (24:38):
There's a question I wanted to ask you.
You've discussed multiple timesabout the average student value
.
Can you explain what exactly isthis average student value and
what's the formula for this?
Speaker 2 (24:51):
Yeah, absolutely.
You take your gross revenuesfor the month and you divide by
the number of students thatyou're serving and in order for
it to be apples to apples, youjust have to be consistent.
You don't have to be comparablyconsistent.
For me, when I track myenrollments, I track my
enrollments by contracts.
I don't count.
(25:11):
So it could be one school gotseven contracts or seven
agreements.
That could be seven families ofthree, that could be seven
individuals.
It doesn't matter.
Because they joined together,they quit together.
They joined singly, they quitsingly.
When it comes to averagestudent value, you can use your
active student count of peoplethat are actively training.
You can do your contractedstudent count and usually your
(25:34):
active is around 70, 80% of yourtotal count.
But whatever you use itconsistently, the hard thing is
some of you have models whereyou're monthly and you allow
freezes and summer's coming up.
I don't know when this podcastis going to come out, but if
you're in the middle of summer,if you've experienced summer and
you offer that, you just haveto keep that in mind.
So when your revenue shrink,you're only going to count your
(25:58):
active members for your averagestudent value, because your
frozen members aren't paying, sothey shouldn't count against
your gross for calculating youraverage student value.
But just so you guys understand, your average student value
doesn't have to be when I say itneeds to be so it should be.
(26:20):
It just depends.
If my average student, forexample, is paying $200 a month
average student value and 75% ofthose members are coming once a
week If you heard the lastpodcast, last episode of mine we
talked about up to Red Beltthey can only come once a week.
So that affects the frequencybecause it comes down to what
(26:41):
your floor plan is.
Let's say you have a 2,000square foot school and I think
the biggest mistake a lot ofschools make is their mat is too
big and their lobby is toosmall.
I think that you have to have amodel planned out For me.
I need a minimum of 800 squarefeet for my mat.
I'd like to have 1,200 squarefeet or more, but I don't need
(27:03):
more than 800.
I know that sounds crazy,because my average class is 10.
For my model to work whichmeans because I have a flex
schedule again referred to thelast episode flex schedule means
that I allow them to go towhatever class they want in the
week.
They have five options.
Flex schedule means that Iallow them to go to whatever
class they want in the week.
They have five options.
So if my model says I have anaverage of 10 for that class to
(27:24):
stay open and be maximized, someclasses might have six during
the week and that slot.
Some classes might have 16, butit will average around 10 or so
.
It could have five or 15.
It'll average 10.
So one instructor teaching 10kids.
I personally don't enjoyteaching more than a dozen
(27:45):
people.
There was a time where at myprimary location, when I was
building the model out, I hadback-to-back classes of 24 to 30
kids and you feel successful,you are successful, but it felt
like a prison to me.
There is no way in heckanybody's going to teach what
I'm doing right now for what I'mwilling to pay them no way.
(28:06):
So I had to change the modeland when I went to once a week
it made all the classes go from24 to 30 to 12 to 15,
essentially because you'recoming less and then you just
play with it.
Essentially because you'recoming less and then you just
play with it.
So, whatever your model is, Ithink your original question was
(28:28):
based off of your averagestudent value.
You just have to have a target.
Your average student valueaffects your gross because your
limiting factor is you can'thave a hundred classes a day,
depending on your class timeslots.
Some people do 30 minuteclasses, 40 minute classes, I do
45s.
I'd like to get to the pointwhere I offer a 75 minute class
for some classes.
So, depending on however manyclasses if you're having four or
five, six, some schools haveeight classes a day Look at your
(28:51):
floor size.
Ask yourself how many people doyou want to teach.
If you want to just have oneschool and you want to teach
till the day you die, then youcan maximize.
I could fit 50 people on thefloor, 100 people on the floor.
But if you want a system thathas an instructor that will be
an inferior teacher to you attimes because they're not the
(29:14):
owner, they don't care, theytypically are not going to be as
vested then you need to have asystem that will work with less
factors or less components.
But to answer your question,average student value matters,
but it matters in relation tothe other metrics.
So I know that I answered yourquestion.
(29:35):
That brought more questions.
Speaker 1 (29:37):
Yes, because my next question then is what that
number of average student value?
Let's say that number is 200.
What?
How do you use that number toyour system?
Speaker 2 (29:50):
Okay, so for me, I had the school.
This is I'm going to speak ofthe current model that we're
doing that I came up with 15years ago.
You want 250 people paying $200a month, so you're doing
$600,000 a year as a elite levelschool.
So, to me, year one you do 120,year two you do 240, year three
(30:12):
360, year four, 480.
And you live.
It depends on who's running theschool.
You know what I found Once youhave solid locations, solid
layouts, it all depends on thequality of staff and it's not
about how good they are at salesand marketing.
It is a combination of salesand marketing acumen.
(30:33):
But really, how awesome arethey as a teacher?
How great are they atdeveloping a good culture of
black belts?
You just need 200 wonderfulpeople.
You need 200 families.
Speaker 1 (30:49):
Because you are zigging when everybody is
zagging.
You have mega school owners,multiple school owners, big
seven to 12,000 square footschool owners trying to just
maximize student active studentcount.
Get them.
They love that high energy of30 to 40 kids in a classroom
just packed with staff and themon the floor.
(31:10):
But you are, you're going.
You're going against the grainis what I'm looking for, the
words I'm looking for.
You want to teach eight to 12students quality instructions
and you're limiting them to comeonce a week because you don't
want to overfill your class of800, 1,000 square foot, small
school location size and I thinkour listeners are more on your
(31:35):
situation than the mega schoolowners.
They do have 1,800 square foot,they do have smaller square
footage and they're trying toget to we went over this trying
to break that 100 student activecount mark and they just can't
do it.
They can't.
They're stuck at 80, they'restuck at 70, and they can't
break that 100 student mark.
You're saying that you don'tneed to have a big school with
(31:57):
30 students.
You can make it and achievethat high grossing revenue with
the smaller schools and set up.
Speaker 2 (32:06):
Yeah, for me, the reason we have contracts at my
school there's multiple reasons.
Obviously it's because you wantthem to commit, but I don't
want a lot of flux in theclasses.
I don't want there to be a waveof people coming in, going out,
coming in, going out.
I want to teach these students.
(32:28):
I want my instructors to reallymove them up.
And imagine if schools rightand I'm not even talking about
Harvard, yale, oxford, I'mtalking about elementary schools
Imagine if these schoolteachers that have 20, 30 kids
in a class and they're teachingthem nine months out of the year
, imagine if kids could changeschools or just stop randomly
(32:52):
and how the heck is the teachersupposed to teach them?
It's already hard enough.
It's crazy.
And I've been there where my dadhas this massive 10,000 square
foot school with five acres.
Do you know how long it takesme to cut the grass?
When I was younger and my dadwas old school, he wanted a push
lawnmower.
Literally, by the time I wouldhave to mow the lawn or do some
kind of edging or hedging orpulling weeds.
(33:15):
Every day.
You're doing something with afive acre property.
We had indoor, outdoor trainingand he had two floors, showers,
all that, foot baths in thefront.
It's amazing and everyone'salways impressed.
Yes, there was a season wheremy father had hundreds and
hundreds and hundreds ofstudents never a thousand, but
hundreds and hundreds ofstudents, but then average.
(33:36):
After we built the school andafter we had the momentum and
then my dad opened some branchschools, that school had 120 to
150 schools students and it'snot uncommon.
I have seen dozens.
I travel right, and I used totravel for Macho, I've traveled
for you know tournaments and youto go see.
(33:56):
I just go see people and I seethese big, massive schools and
when they tell me that they have300 students and I'm not dumb,
I can look around, I look at acouple of classes this school's
got 120 students right now andthen they're like, yeah, it's a
little slow right now, and theyshow me some pictures and some
videos and, yeah, I believe thatthey had six 800 students at
(34:17):
one point.
I would rather have arestaurant that is almost always
packed and I have a season ofcouple years where I could have
served hundreds and hundreds ofmore customers, but I chose not
to, because when you own abusiness, it is not for a year
or a four-year period, it's fordecades ideally, legacy.
(34:41):
If you own a business, anacademy, for decades, you need
perpetual, sustainable,reoccurring success.
I would rather turn away threegolden years of money and not be
empty.
And I'm not saying all schoolsare like that, because I have
seen some schools that are bigand they stayed big.
(35:02):
But if you think that a bigschool is the answer, it's a
headache.
It is a headache.
You know how long it took toclean my dad's school had eight
bathrooms.
It's not glorious, it's verytough.
It took just to mop the school.
It took two hours.
It's not easy.
So, having said that, myschools are 2000 square foot,
(35:28):
one person can clean the entireschool in 30 minutes.
Speaker 1 (35:30):
That's amazing.
A lot of times that's you,pastor Tony.
Speaker 2 (35:32):
Oh yeah, whenever I go to the schools, sometimes
I'll just clean because there'snothing else to do, because if
you have good systems and youhave great staff that runs those
systems, you're just there tohelp.
You're just there to help.
And yes, so the beauty of itand I know that this
conversation has peaked andtrowed don't open a second
school.
Open a second school.
It's amazing.
(35:52):
Don't open a second school.
Open a second school.
It's amazing, it's horrible.
It could be whatever you wantit to be, but it needs to be
accurate to what your target is.
I don't want you to just fallinto it because you're like, oh
yeah, just I'll try it out whenyou find the right location.
It is a half a million dollarsof liability and a lot of these
new plazas that you're going towant to get into.
(36:13):
They may be owned by a realestate investment trust.
It's much different than it was5, 10, 15 years ago.
They're going to ask you forpersonal guarantees that not
only you have to sign but yourwife has to sign.
They're going to ask you forsoundproofing right, because
they're a little more keen onmartial arts schools and
adjacent noise and soundproofwall installation is very costly
(36:36):
and it's going to eat some ofyour square footage and it's
going to be it's going to beexpensive.
This is going to be expensive.
There's going to be some ofthese.
I'm in the process of openinganother location right now and
talking about the difficultiesof opening another location.
Speaker 1 (36:50):
Yeah, and I didn't want to say this that you said
this first, Master Tony.
But listeners, Master Tony isliterally opening up another
location right now.
Know that.
Speaker 2 (36:59):
Yes, and so, having said that, this location is a
Publix Plaza and the owner ofthe location is a real estate
investment trust and they havethousands of properties across
the US and just in Georgia Ithink they have 100 properties.
So the way the lease readinitially is a template.
They could literally move menot just within the plaza at
(37:22):
their choice.
You can move a tenant to adifferent bay.
That's comparable.
They could move me to adifferent plaza and oh,
absolutely not, you can't moveme to a different city just
because you decide to sell theplaza or something like that and
you want to maintain your rentroll.
So you know you're going toneed to have the cash to get
into these plazas and also topay an attorney for 50 an hour
(37:45):
or whatever to review the 10,take 10 hours to review the
lease with you and to iron itback and forth with the leasing
company.
But just be have the rightamount of funding and make sure
that you are properly insured.
But and I know it's hard butmost businesses like a
restaurant and if you look at,if you look at franchises, if
(38:08):
you're just opening a regularKumon or a code Ninja or
whatever, they want hundreds ofthousands of dollars to be there
for you to operate the business, because you need operating
capital, not just startupcapital.
Something to think about andI've been there because, mind
you, some of you heard me say itbefore when I got started, I
(38:29):
went $100,000 in credit carddebt just trying to open and get
my school started, and my firstschool was 1600 square feet.
It felt like 1200 square feet.
It's possible, but the key isto drive solid value and to
charge what you're worth and tomake sure that metric makes
sense with something that has ascalable vertical and then, as
(38:53):
that vertical is successful,then you could start spreading
out laterally and open it, butthen use some of your primary
vertical to plant the nextlocation that's what I think is
best and try not to move yourprimary instructor or yourself.
Speaker 1 (39:07):
So here is the definitive.
All right, listeners, here'sthe definitive answer to the
question Should you open asecond location?
And that answer is yes, but youneed to make sure your primary
location is thriving, is doingrock solid.
You need to have an awesomestaff with pipeline of
(39:31):
additional staff in place.
You got to know your marketdemand in this new area and you
have to have capital.
Don't siphon off from your onlylocation for this as you
ongoing.
You have to have capital, saveup.
If not, do not do it.
And lastly, is your systemscalable?
(39:52):
Master Tony, thank you forjoining us.
We'll conclude here.
If you are enjoying our show,go ahead and rate and review our
podcast or YouTube channel.
Our goal is to make our show assuccessful as possible and your
review will help achieve that.
Have a great week.
I look forward to our nextepisode.
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