Episode 14 - Accidentally Starting a Franchise

 
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Joining us today on the fitDEGREE Podcast is Katy Richardson, founder of NEIGHBORHOOD barre. ⁣

Some people would tell you that there is no formula for success and Katy would tell those people that they’re wrong. In an industry with giants like Pure Barre and Barre3, Katy controls the majority of the market in Tennessee and is expanding into other states.

15 Locations and counting doesn’t happen by accident and Katy is going to share with us what she believes got her this far.

Instagram: @neighborhood_barre

Website: http://www.neighborhoodbarre.com/franchising.php

Best way to reach her: katy@neighborhoodbarre.com

Host-Dan: fitDEGREE is more than just two guys with microphones, it is the studio management software you've been looking for. For more info reach out to me on our website at www.fitdegree.com, in Instagram at the handle @fitdegree, or my E-mail dan.berger, that's B-E-R-G-E-R @fitdegree.com to get the conversation started. Alright now on to the show.

Host-Dan: What's going on everybody, you're tuned into another episode of the fitDEGREE podcast, so welcome back. I'm Dan, your host, joined by cohost Nick Dennis in what is sure to be another great episode. Now what do we have in store for you today? Some people will tell you there is no formula for success, and Katy Richardson, founder of Neighborhood Barre would tell those people that they're wrong. In an industry with giants like Pure Barre, and Barre Three. Katy controls the majority of the market in Tennessee and is currently expanding into other states, 15 locations and counting doesn't happen by accident. And Katy's gonna share with us what she believes got her this far. Welcome to the show Katy, how are you today?

Guest-Katy: I'm doing well, how are y'all? Thanks for having me.

Host-Dan: Oh of course. It's a pleasure. Thanks for coming on the show. So I understand you're actually just about to open your 15th location.

Guest-Katy: Yes. Well we found our 15th location last fall, and she is going to be opening in Orlando, Florida, which is really exciting, it's another big market for us. It will be our third large market to be in. She's going into a building that's currently under construction, so it's kind of at the mercy of contractors at this point to see when we'll actually open. But we're hoping late spring/early summer opening for that location.

Host-Dan: Awesome. Now that's the farthest location you'll be opening from your original in Knoxville right?

Guest-Katy: That's correct.

Host-Dan: That has to be exciting. How did that come about?

Guest-Katy: This is pretty interesting, we have several different ways that we generate leads. We try to follow a strategic growth pattern. Meaning that we've grown, and you can look at where our studios are located. We've tried to grow in a radius from Knoxville that is not too large, because it is difficult to support studios that are too far away from the corporate headquarters.

Guest-Katy: But this is a super strong lead that came to us, I believe off of social media. We have a franchising submission page on our website, neighborhoodbarre.com. So we get a lot of submissions that way, and a lot of times it just says they heard about us via social media or internet. So she came to us and we talked to her for a long time, we have a whole vetting process that we do for any lead that comes through. We actually love when people vet us in return, 'cause it shows that they're a pretty qualified lead if they're also shopping our competitors. She is pretty established, and she has a separate career aside from owning a barre studio, and asked all the qualifying questions, and we went at her pace. Then she came to us and said, "I'm ready to sign." And we were like, yay, we can't wait to be in Orlando.

Host-Dan: Yeah right. So she already had her own barre studio before she approached yoU?

Guest-Katy: No she actually works for USTA tennis association, so she has her own career separate from the barre studio that she's gonna open.

Host-Dan: Okay I was gonna say, that she wanted to bring Neighborhood Barre to a different neighborhood.

Guest-Katy: Yep. Exactly.

Support-Nick: So what does that look like when someone wants to work with you? They fill out the application form and like what are the next steps? Well I guess even back up, how did you even come up with this process and know this was something you wanted to franchise? Most people start a studio and they think oh I wanna own five locations. But you thought to go right ahead and franchise this.

Guest-Katy: That's correct. So my background is actually I got a business degree with a concentration in finance, and then I got a secondary degree in accounting after I graduated. So I didn't know exactly what I wanted to do, but I knew if I had a finance and accounting background I would be able to get a job. I graduated college in 2006, so during the time after I got my accounting degree the economy was in a downturn. So I was actually really lucky that I got hired for my first real job as fast as I did, and I was an internal auditor for, it was as big company called Vulcan Materials, and it was a great job. It was not what I wanted to do, but I was thankful to have the job at the time. And I'm still thankful for the experience that I got.

Guest-Katy: I was always just super active. I cheered in college, got injured, couldn't really do any workout that I had ever done before which you would consider more of a traditional workout. And it was actually my mom that convinced me to start going to yoga. So I started going to yoga, got super into it. I think yoga's kind of like your gateway drug for nontraditional exercise, it's like if you're comfortable going to a yoga class then you'll try a Pilates class. And if you're comfortable in a Pilates class you'll try a barre class. So yoga was my gateway drug. I got certified to teach it, I loved it. And I've always just been someone who marches to the beat of their own drum.

Guest-Katy: Even in this accounting job, I was the Elle Woods of the accounting department. I had to go on these operational audits with steel toed boots, and they called me Kendra, and I was just like, "I'm here. I'm here guys." It was good, and I got a lot of business experience off of that job. So I decided there was no promotions or anything in my company at the time, and I'll just make a long story short, I decided that I did not want to be an accountant, that I knew I could always fall back on that, and that I was gonna take a chance. I was really scared, 'cause I moved from Birmingham to Knoxville, I didn't know anybody when I moved. And I'm moving to a place where I don't know anybody to open a business, which sounds-

Host-Dan: This is a people friendly-

Guest-Katy: I mean it's a certifiably insane thing to do.

Host-Dan: A service business at that.

Support-Nick: That's something you wanna have a network at. Normally it's like I'm an instructor, I have a following, and now I'm gonna open my own location.

Guest-Katy: Yeah. What was I thinking?

Support-Nick: I don't know.

Host-Dan: You were thinking about 15 locations.

Guest-Katy: What I can't figure out is what were my parents thinking to be like, "You should do this."

Host-Dan: Alright. So you did all this, you took the leap of faith. And did you start with Neighborhood Barre, was that the original-

Guest-Katy: It was.

Host-Dan: It was. So that's actually even rarer. They say the average success of a business, most people try two, three, even four times before something sticks. So you had on your first try, something that stuck. Was it at the beginning what it is now in terms of concept? I know you have your own unique system of teaching barre, is that how it started?

Guest-Katy: Right. No. It's not that different. My clients that have been around for a long time would tell you the class is very different now from when I first started, which is true. But, at the same time I opened my studio in a town that had zero brand awareness when it came to barre, which is one reason why I chose Knoxville. And at the same time I was opening a Barre Three was opening, which was actually great for me because they helped to create market awareness and education around barre fitness in general.

Guest-Katy: And their technique is so vastly different from ours 'cause we're a traditional barre studio that people really just liked one or the other. And so it wasn't like any type of cat fight competition. It was like oh well you either like this, or you like that, or you live on this side of town and it's more convenient, or you live on our side of town and we're more convenient. So that was helpful. I would say, as far as the technique goes, I just kept progressing it. The timing, we spend the same amount of working time in our segments every single day, but the exercises for your thighs, your glutes, and your abs change every day, and we rotate a quarterly warmup. So those set times have changed a little bit since I first opened, but I have not really messed with them in about five years.

Support-Nick: Wow.

Host-Dan: And is that just 'cause it's been working so well?

Guest-Katy: Yes. Just once I found the balance, I didn't wanna mess with it. So where we have progressed from there is just the actual exercises that we do. Our range of motion has changed, we still work in isometrics for probably about 75% of the class, sometimes more. But we've added in the strategically placed full range exercises to increase calorie burn, increase heart rate, and increase muscle fatigue. So I think that's very hard to find in a traditional barre studio. People are progressing a little more now, but we have been doing that for a couple of years. So that's always been a draw, people feel like they get a higher heart rate, and a little more cardio, but it's not so different from a traditional barre class that they're lost or kind of turned off. It's still very true to that traditional Lotte Berk based barre.

Host-Dan: And now for anyone listening, Katy had explained to me before this, for those of you like myself who are not overly familiar with barre, a lot of the exercise and everything came from ballet. And a lot of the exercise muscle groups targeted in barre were very quad, and front of the body, and front of the leg heavy. And Katy had explained to me that because most of us are not ballerinas and would like to work more than just our quads, although who doesn't love nice giant quads, it is important to balance the class and work the whole body. 'Cause for those of us in everyday fitness, we wanna look good in more than just the front of our legs. I got that correct right Katy?

Guest-Katy: Yes. So our technique does factor in more glute exercises than most barre classes. I mean I'm sure there's some that probably are similar to ours that I don't know about. But of the barre classes that I've taken of some of the major brands, we definitely are heavier in glutes than those exercises.

Support-Nick: So explain, we were talking about this a little before the podcast. As someone that manages a handful of studios, as well as obviously manages this franchise of studios, what does the average day or the average week look like for you?

Guest-Katy: I'm on the phone all day every day pretty much. I will say I have two completely different jobs. I have two completely different companies. So I have my two studios that I operate, which was three up until January 1st. And I was burning the candle at both ends, I was just too stretched to really give what I needed to give to my clients as well as my franchisees. So, sold one of my corporate studios as a franchise, and kept my two originals. So I am still actively teaching, I love teaching classes. And it's a chance for me to make sure that I'm getting a workout as well. I mean obviously I'm paying attention to the clients, but I try to work out with them a lot.

Guest-Katy: I stay at one of the studios, one or the other, most of the day. And I'm typically on the schedule between one and three classes a day depending on the availability of my other instructors. Monday's is a day that sometimes I'm off the schedule, so I can really get my list for the week ... I'm a list maker. I can't have it on my phone, I have to write it down because I have to cross it off. And if I've done it and it's not on the list I have to write it on the list so I can cross it off.

Support-Nick: I have started doing that. That activeness of crossing it off. I used to erase it.

Host-Dan: You can't do that on your phone.

Support-Nick: I used to have all these different ways.

Guest-Katy: It just feels good to cross it off.

Support-Nick: It does. It does.

Guest-Katy: So I like to know what I've done. And then I transfer the things that I haven't done to a new list for the next day. And it really does kind of keep me accountable. But anyways, so I usually teach a class, maybe two back to back, and then the rest of the day I'm tending to my list, which will consist of a list for Neighborhood Barre Knoxville Studios. And a list for Neighborhood Barre corporate. So those lists, I mean who knows what could be on there.

Guest-Katy: I do a lot of client follow up and retention. I love to try to touch base with people that have come to class for the first time, or who are on an intro package and about to expire 'cause I want feedback. I want to know do they have any questions, do they feel comfortable, have we been meeting their expectations. Which is funny because it's kind of a lot of the same dialogue with my franchisees, but it's a totally different company. I've really had to learn how to balance customer service with serving the needs of my franchisees.

Support-Nick: Okay so dive a little bit more into that.

Guest-Katy: Which one? So the franchisees?

Support-Nick: Yeah. Yeah.

Guest-Katy: 'Cause I mean if you own a studio you know what I mean when I say customer service. You have to make your clients feel like they are a part of your community. You have to continue to build that community to maintain it. Like my dad says, "You can't just build a wall, you have to cure the mortar." So if you own a studio, or even if you are an instructor at one, you know what that's about. So serving the needs of my franchisees can be all over the place because they're all in different time lines in their business. So we have people who are in pre-opening. We have people who have just opened. And we have people who've been open for a couple of years. And then we have our Nashville studio who opened up her second location a year ago, a year and a half ago maybe.

Guest-Katy: So everybody's in a different spot. And the good thing is I am in year seven, or I just had my seventh year anniversary. So I have been-

Host-Dan: That's a lucky number.

Guest-Katy: Yeah, right. I have been where they are. So it's a lot of saying, "When I was in my opening and had all this excitement I wish I would have done more client followup and retention." So I'm using tools that I use on the studio side to guide them, but then you also have to give managerial advice on staffing problems, on just issues with a landlord, issues with just all of these things, and try to keep the franchisee motivated in a comfortable spot. We don't want them feeling like they're working for nothing.

Guest-Katy: We wanna keep them profitable, and excited about their job. So it's a lot of phone calls, and a lot of metrics, and finding areas where we feel like they could improve, and areas where they're already excelling, and how do we maintain that so that they don't experience some of the ebbs and flows, that I've experienced, because I wish I would have taken my own advice along the way, or had somebody to give me the advice along the way.

Support-Nick: Yeah.

Host-Dan: That's the one we hear all the time and we can relate. I only wish someone was there to give me advice. Now the downside of that is if someone did what I'm doing before me, I probably wouldn't be able to be here doing this. But at the same time, someone with general advice, a mentor, someone in your corner just to put you in the right direction.

Guest-Katy: So that's kind of what I am for the franchisees because I've been there.

Support-Nick: It sounds like a balance of a mentor, a manager, an investor, a friend. You gotta wear a lot of hats during this conversation.

Guest-Katy: Yes, oh yes. And luckily I ... I mean I have a great relationship with everybody that is a part of our system. I love going to visit their studios, going out to dinner with them, and hanging out as well as helping them and serving them in whatever way I can to help them build a thriving business. At the same time, the tough balance for me is I want them to succeed so badly that I sometimes neglect my own. So I have to really, really try to take my own advice.

Support-Nick: So now explain to us how long did it take you to go from your first studio, to your second studio, to I'm gonna franchise, to five, to 10, to 15. What was that timeline like?

Guest-Katy: Okay, so I opened the very first Neighborhood Barre at the end of 2011, like fall, October 2011, and decided to open a second studio in ... I decided to open it in 2013, it opened in February of 2014. And that's because there was competition coming to town in a neighborhood that people had been begging me to put a studio in, and I thought to myself I can either-

Host-Dan: Turf war.

Guest-Katy: Yes it was a turf war. If you only knew the cat fight that ensued. I had to be real with myself and say, listen, yeah your classes are full and wait listed, and yes you're gonna split your crowd, however, you can rebuild. And also, you can't think you're so great that your clients are going to continue to drive 20 minutes to come take a class, because even if the class isn't as good, it's gonna be good enough for the convenience.

Support-Nick: People are lazy.

Guest-Katy: Yeah. For the convenience factor.

Support-Nick: Seven or eight miles. I mean there's a reason a McDonald's is on every corner. It's just convenience at the end of the day.

Host-Dan: In my hometown there's two Wawas across the street from each other just so people don't have to turn around and get off. If you're driving one way you go to this Wawa, if you're driving the other way you go to that one. But it's true.

Guest-Katy: It's true. So I was luckily able to negotiate this crazy hair brained scheme for a pop up studio, because I knew I had to get it opened immediately.

Support-Nick: That's normally when you're most creative, when you need to be.

Guest-Katy: Yeah. I didn't have a wall, like I had two walls, or three walls I guess, a front wall, a back wall, and a side wall. And I didn't even have a wall. So I had to fashion these curtains ... Anyway, I could go on about that. But, I opened up my second studio, then flipped it into, from a pop up to a real studio. Its now been there for four and a half years, almost five years. Right after that I sold the first franchise in May of 2014. And then they opened in the fall of 2014.

Support-Nick: So that was three months after your second location? You went through all of that, building this wall, cat fight, turf war, everything, and now you're already, three months later you're like, "I'm gonna franchise a location."

Guest-Katy: Yes, had no idea what I was doing. And it's funny 'cause I came from Birmingham, I did not know the people who bought the studio at all.

Host-Dan: Oh really? They just said, "We want Neighborhood Barre," and you said, "Alright you seem nice."

Guest-Katy: Right, basically. So one of the ladies had been working in Knoxville and she came and took a class. And she was a die hard Pure Barre client, and she was like, "I have never been so sore. That class was awesome." So she had never been exposed to another type of barre, and she had always wanted to open a Pure Barre, and there was a territory radius so she couldn't open one where she wanted to open it, so they approached me because they knew that the workout was-

Host-Dan: For someone who wanted barre, it was what they were looking for.

Guest-Katy: Yes.

Host-Dan: So after this first group of people, you seem nice, open a Neighborhood Barre, they love it. What was it like going up to 15? I remember you said once you got to 10, then it's like you grinded your way to 10 and then just five more popped up. You got to 10 and then boom, 15. Have people been coming to you en masse still like, "Hey let me open up." And you're like, "Relax, I gotta take care of me first." Or what's the current state of affairs?

Guest-Katy: No, and that's the thing. If a super qualified lead comes to me I'm not gonna turn them away. And it's funny, you know how people always say, like when you go through a breakup and then you decide you're not looking for someone, that's when somebody comes along and it's like your soulmate. When I made the decision to stop focusing on corporate expansion, and to focus on stabilizing what I had, is when these five amazing people came into my life. And I would not have continued to expand if I didn't believe in them as business owners.

Guest-Katy: And you know it's like the more you do something the easier it gets, and the easier it became on me, and the more I was able to have it be second nature in providing what they need from me. So I'm opening up franchises and I'm kind of learning as I go because I didn't have anybody to really give me much advice. I didn't' know anybody else who had started a franchise. Looking back on it now I probably should've reached out and sought out more advice, but I don't know maybe I was just timid about it so I didn't. I have made some huge mistakes along the way.

Guest-Katy: There was one year that I pretty much flushed $60000 down the drain, and had to rebuild that. And that was on corporate side, and I had an attorney who my first attorney said he was a franchise attorney and was writing me a franchise disclosure document, and it was non-compliant. So I had to have that rewritten. And actually my franchise development manager that I work with now, he is the one who told me that my FDD was not compliant, and I didn't work with the company he was with at the time, but then a couple years later came back around and I work with him now. So he's the one who even told me to begin with that my documents would not stand up to the Federal Trade Commission.

Host-Dan: Well thank God he stopped the bleeding so to speak.

Guest-Katy: Oh my gosh, yeah. So I was like, okay well this sucks because I spent $14000 on this document and it's not even right, and now I'll have to go pay $25000 for a new one. Somebody should've said to me, "Your FDD only cost you $14000? Most of them cost between 20 and 30." If someone had said to me I would have known red flag, like something's not right if I'm only being charged what 2/3 of what it should be.

Support-Nick: Well under market, yeah.

Guest-Katy: Half of what it should be I guess.

Support-Nick: Well if you had no idea. 'Cause sometimes they are in the market of scamming. I mean we're learning this with ... Just last week over company, it might have even been earlier this week.

Host-Dan: Yesterday.

Support-Nick: Yesterday, there we go. Yesterday. Company tax returns, filing a company tax return. I mean you have no idea, I mean you probably know, but how much money they could potentially charge, and then how little they could potentially charge for the same job. Some industries, usually when it comes to legal matters it's a pretty industry standard price, but you never really know until you talk to enough people. And then by the time you talk to enough people, I mean how late is that gonna be.

Host-Dan: So with everything that happened, coming full circle, if you had to pick the top one, and that may not be feasible, the top two things that took Neighborhood Barre from a hope and a dream of a 27 year old that new no one in Knoxville, to 15 locations, what was it? What was it, or what could you say those top two things were?

Guest-Katy: I was willing to take a change, and again, I said the same thing as I did when I opened my very first studio, the same thing when I decided to really invest into the franchising, "I would rather try and fail than never try at all and wonder what would've happened." And then the second thing is knowing what you're getting yourself into. I wish I would've known a little more what I was getting myself into and had the advice.

Guest-Katy: But it literally, if you have a good attorney, because it's so regulated. I mean it's regulated by the Federal Trade Commission, you have to have a good attorney to give you good advice on, one, your legal documents need to be buttoned up and perfect. And two, you need somebody who can guide you towards, if you don't have an internal sales person, towards an external sales person that is not charging you a monthly retainer that you have no idea where it's going. So, in the position I'm in now, I've sold more studios and spent less administrative money doing it.

Support-Nick: That's awesome. That's really exciting.

Guest-Katy: Because I'm with the right people.

Support-Nick: Yeah. Well I would argue to your second point of I wish I knew a little bit more. There is something to say about being a little naïve before you jump in, because if you knew everything you might not do it. But surrounding yourself with the right people with experience, while you have your ambition, hunger, and passion, I would definitely say that was key for you getting to the next level, and making this legit. We've said it before, you're at 15 now, this is legit, this is a real thing.

Guest-Katy: Can't quit now. No running away from it.

Support-Nick: Now you got too many people depending on you.

Guest-Katy: Exactly.

Host-Dan: So if someone listening wants to keep the conversation going with you, and learn more about Neighborhood Barre, how do they reach out to you? What's the best way for them to get in contact?

Guest-Katy: Yeah. So the best way to get in contact if anybody is interested in opening a franchise is to fill out a franchise submission form on our website, it's neighborhoodbarre.com. And there is a landing page for franchising. If anyone just wants some advice I am more than happy to help anybody take their business to the next level, as long as you're not opening up next door to one of my studios.

Support-Nick: Turf war.

Guest-Katy: Cat fight. I mean I'm happy, like I said, to discuss. So they can E-mail me at corporate@neighborhoodbarre.com.

Support-Nick: Awesome. And we'll have all that information in the podcast page. Thank you so much for coming on today Katy, it was a really fun conversation.

Host-Dan: Yeah it's a great time.

Guest-Katy: Yeah, thanks for having me. It was fun.

Nick DennisComment