Here’s the model he’s building now…
What’s up Gym World?
One thing we see a lot on here is that bigger isn’t always better.
Joe Riggio, the founder of Varsity House Health & Performance, is another data point.
In 2006, he began training athletes out of 1,200 sq ft. Then, he upgraded to a 5,000 sq ft space and eventually bought 17 acres to custom-build his dream gym.
Now, he’s working on a new concept that’s smaller and more profitable.
Let’s unpack his story:
Building Varsity House HQ
Varsity House started as a small athlete training facility. By 2011, the gym was struggling, so Joe got a mentor who told him he needed to run more sessions throughout the day.
💡 This isn’t unusual for athlete-specific gyms. Business tends to be seasonal, and often, they’re not willing to pay much.
So he added a 6-week challenge that targeted the general population. That helped Varsity House scale into a 5,000 sq ft space.
💡 Joe’s still running that challenge today, and it’s made $4.5M so far.
Over time, Joe outgrew his space again and wanted to expand. He thought about a 10,000 sq ft building, but rent in the area was ≈$30k/mo, and he couldn’t afford it.
Luckily, running a premium gym gave Joe access to premium clients. One of his members owned a construction company and knew that Joe wanted to expand. So, he took Joe out to dinner and pitched an idea:
- Why not buy a building instead of renting,
- Pay a mortgage, which would be cheaper, and
- In 20 years, own a property worth millions.
This member turned into a mentor for Joe, giving him the knowledge he needed to build a massive asset.
And that’s exactly what he did. With this member’s help in the construction process, Joe was able to design a gym for professional athlete training.
But a larger facility came with more complexity. Expenses were higher and there was more to manage.
Varsity House grew for a few years, but eventually, things leveled off. Despite being a 7-figure gym, profitability wasn’t where it needed to be.
At the time, the gym offered large group training and 1-on-1 personal training. To reduce complexity and increase profitability, Joe added small group training where members trained 2-3x a week on a customized plan for $200/mo.
Business boomed yet again until COVID hit. Profiting from large group was challenging, so Joe went all-in on small group training and doubled the price to $400/mo.
It became the gym’s best and most profitable product. That inspired his new concept:
Varsity House Personal Training
Many gym owners dream of having a big facility and making big profits. But these trophy gyms are probably going to give the owner big headaches instead.
With over 25 years in the industry, Joe is adopting the strategy of any seasoned gym owner: making things as simple as possible.
Varsity House Personal Training is his new side project. He plans to open 20 small gyms each between 1,200 to 1,800 sq ft using a straightforward model:
- 1 product (small group personal training)
- 3 price points (average $400/mo per member)
- 100-150 members
- 2.5 employees
It’s very similar to Alloy’s concept. Joe says if Rick Mayo can do it, then why can’t he?
💡 He figures each location could make $550-$600k a year in revenue with 40% profit. That’s double the margin of Varsity House HQ.
One location is already open with others set to launch in spring and next fall.
Jeff Schumacher and Devin Gage of Engage Personal Training are also scaling a similar model.
Seems to me like the industry’s sharpest minds are all moving in this direction. I’m really interested to see how this trend plays out in the future.