Ask a Lawyer: 3 Things to Consider When Buying or Selling a Gym

Podcast (3)

Mike Warkentin: (00:01)
Ever wish you could talk to a lawyer about legal issues at your gym? If so, keep listening to Two-Brain Radio and be sure to subscribe for more shows, just like this. I’m Mike Warkentin, your host and Matthew Becker of gymlawyers.com is here to help fitness entrepreneurs navigate the legal world.

 Matthew is an attorney and the owner of Industrial Athletics in Pittsburgh. He’s one of us, not some random lawyer who doesn’t know what we do in the micro gym industry. He knows our business. And today we’re gonna talk about buying and selling a gym. So Matthew here’s the deal: buy and selling a gym. It’s kind of a win for both parties. The parting owners, they get what they want and the acquiring parties get to expand their reach and help more people.

The sales process is often way more involved than a handshake and a PayPal transfer. It’s a huge topic. So let’s come at it from a really high level. What are the key things that buyers need to consider when a gym is changing hands or sellers for that example, for that matter, what are the biggest issues in this entire complicated process?

Matthew Becker: (00:59)
All right, let’s go with three of them. And foremost, the buyer needs to know the current that they’re, the space is either lease or own get very good readout due diligence to what the assets are of the current business.

Mike Warkentin: (01:35)
OK.

Matthew Becker: (01:36)
OK. And third, find out from the buyer’s perspective, the buyer needs to find out what current written contracts are in play and get a copy of all of those written contracts for review.

Mike Warkentin: (01:49)
Okay. So those are three big ones. I can tell you that I was looking to buy a gym. none of those things would’ve been on my list. I would’ve been like, Hey, do I get to keep those barbells? Are you taking that desk? All cosmetic stuff that probably wouldn’t have done very much for me. So let’s, let’s get right into it. Start up with the first one we’re talking about lease versus own. How do people figure out what they need to know and what they need to docent in that scenario?

Matthew Becker: (02:14)
Okay. So a quick conversation with the current gym owners gonna tell you or not the space is leased or owned the issues come in when you actually buy the business. So let’s say you own a gym, Mike, and I wanna buy it and you lease your premises, actually let’s go with owned first. Cause that’s a quick one to just kinda cross off list. You own your building. Cool. OK. The only conversation we need to have is whether I’m gonna buy the building from you or whether I’m gonna rent the building from you. And then you know, that whatever that decision is, we’ll kind dictate what we do road as, as, or renting the real issues you current owner’s space.

Mike Warkentin: (02:59)
So I mean like year 3 or 5 and I wanna sell my business, but I’m still signed on for the rent the next two years of the lease.

Matthew Becker: (03:07)
Exactly. Okay.

Matthew Becker: (03:08)
Because the commercial lease that you have with the landlord is a contract is legally binding docent that you can’t just get out of because you no longer wanna open or, or I’m sorry, you no longer wanna own your gym. and on top of that, if you are selling all the assets and you’re getting out of the gym, your name is attached to that lease. You’re not gonna want it attached to the lease anymore. So me as the buyer, I need to get myself attached to that lease. And that’s where the problems start to come into play.

Mike Warkentin: (03:43)
Okay. So I’m gonna guess that, you’re, you’re probably not able to do this yourself because there’s a lot of legal contracts. And if you list to our previous show with Matthew, we talked about lease issues and so forth. You’re dealing with big giant contracts that have all sorts of clauses and sub clauses and so forth. Now you gotta figure that out. So how do you do that? Is that that’s you get, you need a lawyer, I’m gonna guess, probably not speaking muddle through yourself. And then at that point, I think you probably have to deal with some landlord issues. Am I right?

Matthew Becker: (04:09)
You’re you’re gonna have two, so, so three parties, if you’re, if you’re a current gym owner looking to sell, go pull out your commercial lease and go through it until you find the section that’s titled assignment and subleases.

Mike Warkentin: (04:23)
What am I looking for in there?

Matthew Becker: (04:27)
So this is gonna dictate how you get out of the lease, you as the gym owner, get out of the lease and give it to me the gym buyer. OK. OK. And these can be very complex and these can actually cost you guys a lot of money as well. So we’ve seen leases where there’s an assignment, let me back up quick to cover a couple of these legal terms. An assignment basically means that me as the gym owner, I step in as the legal party responsible for the lease. So I don’t pay you the current gym owner and lease or tenant who then pays the landlord. That’s a sublease

Mike Warkentin: (05:07)
It’s just a switcheroo.

Matthew Becker: (05:10)
Yeah, yeah. Right. Sure. Right. It’s a switcheroo. Yeah. I’m stepping, I’m switching in for you.

Mike Warkentin: (05:14)
OK.

Matthew Becker: (05:15)
The, the problem that, that, that you see is that landlords may or may not want to do that because you’re an established business. You’ve been paying your rent for three years of the five year term of the lease. The landlord may have been a little bit nervous about leasing to you in the beginning, but you’ve proven yourself and you’ve been paying on your now I’m a brand new business and I’m gonna step in and try to, to take over the lease. And the landlord might say, I don’t like that. I’m not gonna take another risk on another new business. It paid off for me the first time. I’m not gonna take my chance a second time. I don’t wanna assign it to somebody new.

Mike Warkentin: (05:55)
Small business failure rates would definitely make that a, a concern for landlords, for sure.

Matthew Becker: (06:00)
Right? And so sometimes in the, in this assignment and sub section of the commercial lease, the landlords we’ve seen will charge a thousand dollars, may charge $3,000 in order to do what they call their own due diligence to the buyer to find out what kind of financial standing the buyer has before I, as the buyer can move in and take over your lease. And at the end of the day, the landlord might say, Nope, I’m not doing it.

Mike Warkentin: (06:32)
Wow. So in your existing lease, you may or may not have clauses in that assignment section that could prevent you from selling your business and getting out of that lease.

Matthew Becker: (06:43)
Yep.

Mike Warkentin: (06:44)
Wow. Okay. So that’s so that I would not have thought of, and that’s something I guarantee a lot of gym owners aren’t thinking of. If you are starting the sales process, even if it’s like, hey, I don’t know if I like this anymore. I wanna think about selling. You need to pull out that lease and look at that section right away. Is that section gonna have – you can never assign this or is it very common to just see like, you know, it can be assigned with these conditions? How does that, what does that usually look like?

Matthew Becker: (07:09)
It will often say something like, the lease may be assigned upon written consent from the landlord. Landlord will not withhold their consent unreasonably, but the landlord reserves the right to review all docents associated with the assignment or some, you know, something like that.

Mike Warkentin: (07:29)
Wow. But that, so that gives a ton of power to the landlord. Right. So the landlord at that point can actually block the sale if you’re gonna sell to someone with a crap credit rating and no business history and maybe some criminal convictions, the landlord could actually block that sale.

Matthew Becker: (07:41)
Yep.

Mike Warkentin: (07:41)
Wow. Okay. So that’s a huge, huge deal.

Matthew Becker: (07:44)
Yes. Yeah, because the option then if the landlord’s gonna block, it is either one, the sale doesn’t go through or to me as the new buyer needs to go find a new location. But you, as the seller are still stuck in this, this lease. Even if you sell me all of your assets, your gym and everything and run a gym. You as the current gym owner, can’t get out of it.

Mike Warkentin: (08:10)
Wow. Could, is a sublease an option there, but I guess the sublease would come with you basically taking on the risk where if the, the new guy doesn’t pay you, you still have to pay the landlord. Is that a situation that develops too?

Matthew Becker: (08:24)
It is. Yeah. And again, that section and the commercial lease is gonna talk about assignments and subleases OK. So landlords also like to maintain control over subleases as well.

Mike Warkentin: (08:35)
OK. So that’s, again, that this is really important because if you are thinking about selling, you need to pull out that lease and then you need to figure out what it means. I would recommend contacting Matthew to tell you what it means, because you probably won’t know. I mean, this is something, if I had read it, like I was the guy who read my lease, cover to cover, just to say that I did it, but I didn’t understand everything that was in there. Right. I got the, I accomplished what I set out to do, but I didn’t understand it, which is what’s more important. And I certainly didn’t know how to make changes to it or negotiate based on that. So how many have you seen a lot of sales go south? Because of that clause?

Matthew Becker: (09:08)
I would say probably about a third. I would say a third of the sales end up with big problems around the assignment. Subleases and you know, a big problem that we have is when the gym owner calls us or the, the, the, the owner or the buyer, we, we can, we can assist both sides, not at the same time, but one, one or the other. And, you know, one of those, either the buyer or the owner contacts us and they say, hey, look, we need, we need your assistance writing up the docents in order to finalize the sale. And I say, great. And they’ve talked about pricing, they’ve talked about closing dates. They have list of their assets that they’re selling. They’ve all created your LLCs and everything.

And I say, has anybody talked to the, to the landlord? And the conversation just like stops there. You know, if, if you listen back to the previous episode, when we talked about, you know, it’s, it’s important to get somebody like me involved when you’re just looking for a commercial space, we were talking about commercial leases, same thing involved here. It’s really important to get somebody like myself involved. If you’re even thinking of buying a gym, or you’re even thinking of selling your gym. Cause you gotta understand these things before you jump the gun and start negotiations with the buyer or selling. Sure.

Mike Warkentin: (10:24)
So it’s not step 30 right before the plane, no launches into the air. This is like step two, before the plane even gets on the runway is figuring out how do I have to do this to satisfy the terms of my lease. So that’s, that is a big deal. So if you don’t have this in your brain and you’re thinking about selling right now, contact a lawyer, contact Matthew, or if you’re thinking about buying, you would probably, and Matthew correct me if I’m wrong here. But if I was a buyer, I would start to think about getting my financial house in order and being prepared to show a potential landlord, a new potential landlord, financial statements, justification for why that person should, you know, sell or allow me to assign, obtain this lease. is there something that a buyer can do to make that process much more greasy and get things done faster?

Matthew Becker: (11:11)
So first and foremost, the buyer needs to have an LLC, then you need what’s called an operating agreement, that shows the capital contribution of that LLC. And that’s going to be the first line of defense of your financial backing for your business. Then set up a business account and make sure that you have enough money in that business account that it actually looks like you’re a legit company that has a lot of money and that if the landlord comes to you and they wanna do their due diligence on your finances, you have dollars to show them.

Mike Warkentin: (11:57)
Okay. So those are two big first steps whether you’re buying or selling. So guys, if you are in either of those positions, you now know two important steps from either side that you need to take, let’s go on to the next one that you mentioned assets, what’s going on there. How do we deal with that? So that’s where we’re talking like barbells and kettlebells and stuff, or what else?

Matthew Becker: (12:17)
The assets could be a list of anything that is beneficial to running the gym. So we’re talking, equipment, we’re talking couches. we are talking about brand names, the trade name, the DBA joint business ads, maybe in, in this case, your CrossFit affiliate name. OK. That’s an asset. It has a reputation, websites, email addresses, accounts, membership accounts, all these things are assets to the gym.

Mike Warkentin: (12:51)
So is staffing included in there?

Matthew Becker: (12:54)
Staff can be included. OK.

Mike Warkentin: (12:56)
So that’s interesting. Yeah. We won’t get into the weeds too there, cuz we’re getting into like employment contracts, W2 and all that other stuff. whatever. We’ll, we’ll leave that for another show. But so basically when you’re looking at assets here, all the stuff that is essential to running the business and it’s not just barbells, it is all the other stuff from accounts. Like Wafi things like that, that you mentioned payment processors, all that stuff. So it it’s a giant package of things that you have to consider. What are some of the problems that come up when people don’t consider this stuff?

Matthew Becker: (13:23)
Okay. So there’s, there’s, there’s two big things here that, that we need to consider the first is are we talking about an asset purchase agreement or a stock purchase agreement and I’ll give a real overview things are, so let’s go back to our example. I, your, and your is set up as my gym, LLC. And you operate as the factory have LLC a three, I can come in as a buyer and I can buy my gym, LLC. And everything that comes along with it, all the assets, all of the debts, all of the titles, anything and everything that comes along with, or I can come in as the buyer and I can just buy the assets through what’s called an asset purchase agreement, which means I’m really just buying the sweat factory, the equipment, you know, all those things, the, the, the website, all those things that we’ve talked about.

Matthew Becker: (14:35)
Okay. And one of the primary things that we have to consider here is does the company have any debt? Did you take out a business loan when you started your gym? Did you take out a, a PPP or an idle loan during COVID that now you have to pay back? so what kind debts exist on the company? Because if I’m coming in and I’m, I’m like, I wanna the company, I, then I to accept those debt. Well, there are advantages and disadvantages to, but nine times out of 10, the easiest way to do this is to just buy all the assets. I’m leaving you up to cover all those debts. We’ll work that into the purchase price have to, but I just want the assets and the name, sweat factory.

Mike Warkentin: (15:23)
Okay. So what you’re getting into here is essentially corporate structure, right? To see like how someone has set up their, how everything’s set up. And like for my business, we have a name that nobody knows about that’s the corporation. Then we have a doing business as, and there you go. So it’s, that applies exactly to me. I think a lot of people have the same things. So you could actually, if you got into some complicated systems, you could get some structures that are weird. I’m guessing like there’s like holding companies and this owner, multiple owners, like all sorts of fun stuff where you’re chopping up this pie in a whole bunch of different ways. And there’s three pies over there that also have a piece of this. Like that sounds to me like a little bit more complicated than me a fitness trainer can figure it on my own.

Matthew Becker: (16:00)
Yeah. Yeah. And, and, and thankfully the, the business that the gym businesses are typically small. So we don’t usually have to deal with holding companies. But what we do end up dealing with are partners, h. And what, what, what gym owners oftentimes don’t seem to understand is that if you entered a gym, you opened up a gym with two other partners and you wanna sell the gym. Those two other partners also have to agree to sell that you can’t just do it on your own.

Mike Warkentin: (16:28)
Yeah. So I guess if we’re starting to summarize action steps for people is if you have partners, you need to speak to them first and get them board with this whole process. After that, if you’re a sole proprietor or sole owner, whoever you wanna call it, less complicated, but you still need to take the step of figuring out, well, how actually I’ll ask you this question, does the seller decide the asset sale or the stock sale? Or is that a purchase or decision or is it one of those negotiable things? Like, how do you decide that? Who determines how it it’s

Matthew Becker: (16:58)
It’s it’s would the easiest way to determine if you’re buyer, we suggest you go in only the assets

Mike Warkentin: (17:08)
That’s advice.

Matthew Becker: (17:10)
We’re if you’re the seller, we’re gonna have corporate structure, your partnerships, your, your assets, your debts, we’re gonna have to figure out, you know, if, if there’s a lot of debts in here, then we can get the buyer to take over those debts. Then we may wanna do that. And so from a seller’s perspective, it can sometimes be more advantageous to do a stock purchase versus an asset purchase, but without getting real complicated on a, on a podcast, just to understand that there are two different types of ways to buy and sells and there’s advantages and to both, it’s not so simple as I’m gonna give you $75,000, and you’re gonna gimme the keys to your location,

Mike Warkentin: (17:55)
Which is, I think what a lot of us, myself included would’ve expected

Matthew Becker: (17:59)
which is what they try to do.

Mike Warkentin: (18:02)
Right. It just, and so have you seen stuff come back where it’s like, Hey, we, I sold my gym and whatever, and then all of a sudden there’s a whole bunch of legal issues that crop up because the processes were not followed at all properly. Like has, have you seen that happen?

Matthew Becker: (18:14)
I haven’t seen one fall through, on the initial purchase yet. What I have seen is gym owner A sells to gym owner B who then tries to sell to new guy C but because A and B didn’t do it properly. It causes all kinds of issues between B and C. OK. And so it ends up costing a ton more than it should… to go back in the past and try to fix all of the problems.

Mike Warkentin: (18:41)
It sounds a little bit like when you tan your fishing line and if you just get the snag out right away, everything’s cool. But if you really start pulling it stuff and kind of don’t leave it for a bit, then it gets worse and worse. You just have to cut the line. Right. so this sounds super complicated to me. I imagine for a lawyer it’s complicated, but par for the course mm-hmm, give me a ballpark idea.

Sales agreements, like how does this, what kind of costs are people looking at to get a lawyer involved here? Because what I wanna give people is a perspective of, you could end up costing yourself a ton, more money down the line by doing this wrong, versus this investment upfront is better. What kind of, again, I know it’s a broad range.

Matthew Becker: (19:18)
It’s a broad range.

Mike Warkentin: (19:19)
Give me, gimme even like, even if it’s like $50,000 range, like, what are people looking at for general request or something like this?

Matthew Becker: (19:26)
If you go out and hire some, this is, this is where attorneys can cost a lot. These things complicated could upwards to 10 for depending on how much work they need to do, how complex all of this is, and that for little gym owners that can often scare them. And that’s oftentimes where we end up in the situations where they just try to do it and hope that nobody ever picks up on it. I can’t quote our exact prices cause everything is situational.

Mike Warkentin: (20:17)
If you have it like a slightly less complicated situation, right? Like where you’re not doing have 17 different partners in four different countries and all that other stuff. Right. So I think if you’re, if you’re like your basic gym owner, those are some numbers that you can at least think about. If you, you know, you’re a multinational enterprise that has real estate, you know, the whole consortia thing, maybe it’s gonna cost a bit more. But at that point, you’ve probably got the money to pay that seven to 10,000. So that’s a huge one. The, the takeaway for me here is whether you’re buying or selling, you have options and you would be wise to speak to an attorney to figure out what are your best options going into this thing? Should I sell stock? Should I sell assets? What’s more beneficial for me. And again, this is not a down the line thing. This is like, if I’m starting to think about selling or buying, I should do this first or at near the beginning rather than last. Okay. So that’s, that’s a big deal for people. Now. Here’s another one we’re getting into more paperwork, which I’m sure you love contracts. What’s going on there.

Matthew Becker: (21:12)
Oh, paperwork. Right? We all, so there’s, there’s typically three, I would say the three most common written agreements, written contracts, legal contracts, owners. One’s gonna, two is gonna your membership contract and three is discussion for discussion, but those are gonna be like your big three. and when gym owners buy, or when, when new buyers buy into a gym, they oftentimes make the assption that you, Mike, you’ve been running your gym for, for five years and you’ve never had a problem. So all your contracts must be good. Of course. So I’m just gonna come in and I’m just gonna use all your contracts. And the, the problem there is, you know, we offer a service called the legal checkup, where we work with established gym owners to review these contracts because nine times outta 10 there’s problems with them. And so if you just go in and buy into a gym and just assesss all of the contracts that are already there, then there’s potentially, you’re just walking into the potential legal problem.

Mike Warkentin: (22:28)
It’s like, someone’s handing you like taking a handing pin and just handing it over to you. And you’re like, it’s yours.

Matthew Becker: (22:35)
In addition to that, you know, you get one of the, one of the things that gym buyers love to do is go in and buy a gym and turn around and up the prices. And you need to know what’s in the current membership contract. Are you able to do that? Are you not able to do that? Are there already provisions in there?

Mike Warkentin: (22:58)
This is a huge deal. And I talked to Tyler Welch. He’s a guy in Utah that he loves to buy unprofitable gyms, and then he’d make them profitable. Mm-hmm, just a, like a genius of a, of a guy, check out the show in our archives – Tyler Welch is the name. So this, if you’re in a similar situation where you’re gonna buy an unprofitable gym and your plan is to apply the Two-Brain principles and fix this thing by probably upping some rates, change and policies, all the things that a solid gym needs to do, you’re going to need to look at those contracts to figure out when you can do that. Is that accurate?

Matthew Becker: (23:30)
Not only when, but if.

Mike Warkentin: (23:33)
Yeah, if you do that, so that’s a huge deal because you if you’re gonna do the Two-Brain plan and fix this thing, and we can tell you how to do that. You can do it step by step, but you can’t, you might not wanna buy that gym. You’re locked into stuff that you can’t change.

Matthew Becker: (23:52)
You know? And, and then, and another thing to consider is; if you’re walking into a gym that doesn’t have membership contracts, and you’re working with somebody like Two-Brain Business, they’re gonna automatically tell you, you need a written contract. And so now you’re gonna be profitable with, let’s say five members wholly, every month, there’s no written contract. Guys, you sign an auto contract for your, they may not be super willing to do that.

Mike Warkentin: (24:27)
Okay. So let, let’s look at this from, and you know, this is for all gym owners, but let’s look at this specifically from a Two-Brain Business gym owner situation where, let’s say that guy or girl, or whoever is going to buy a gym. What are the things in the contracts that you would look at and be like, whoa, do not buy that gym because it’s going to be unfixable. What are you seeing in there? If you do a review and you’re saying like, that is a huge deal for you.

Matthew Becker: (24:51)
If I’m looking in the legal contracts. So we’re talking about the waivers and membership contracts and the staff agreements.

Mike Warkentin: (24:56)
Yeah. Like what’s, you know, like, so like, let’s say, I, Mike, I’m gonna buy, I’m gonna buy John’s gym over there or whatever. And I’m, I’m all excited about it. I send it to you and you start looking the John’s contract. And you’re like, dude, I don’t think you can fix this thing because of this assist. Like, what is some of the real big things that crop up where you’re like, oh man, whoa, this is a, this is like, this is a mess.

Matthew Becker: (25:15)
Yeah. I don’t know that. I don’t know that I would ever see anything in a contract like that, that I would say you need to back off. OK. And you don’t buy it. It would just be more like you have a membership contract or you have one of these contracts. You have to change it when you get in there. Okay. Okay. So, you know, I don’t there you’re, you’re free to change the contracts whenever you want. So I don’t know that anything would say, you know, that that’s not like I, I would, I would have far more examples of commercial lease to say, don’t, don’t do this than something like a, a membership contract. I think it’s more along the lines of just, you’re gonna have to do this. You’re gonna have to make these changes. You’re gonna have to implement these contracts. And is that gonna cause a problem? OK. And if you think it is gonna cause a problem, then yeah. Now maybe you wanna back out, cause you’re gonna have to implement these.

Mike Warkentin: (26:08)
So let’s look at it then from say, a rate increase. Cause that’s a common one where if you’re gonna buy a gym often that gym’s rates are way too low and right. We have a formula, two brain can tell you exactly how to set your rates based on the life that you wanna live and the profit that you need. And all these other things, formulaic, easy, get a mentor to help you with that. But let’s say you wanna buy a gym and the rates are low and they’ve got contracts in place saying I paid, I I’m site clients signed up for 12 months at this rate. What do you do? You have to honor those contracts. Do you not?

Matthew Becker: (26:35)
You don’t. OK. Not once the business is sold.

Mike Warkentin: (26:39)
Talk to me about that because what, yeah.

Matthew Becker: (26:42)
Yeah. So what you do is, is you kind of have to work this relationship as, as, as you go through the buying process. So, you know, in an ideal world, in an ideal situation, I’m the buyer. I come into your gym and introduce myself, I’m building relationships. Hopefully it’s not a, this point I’m taking over. So they paid $75 a month. And now they’re gonna pay a month, right? Like month for the next you do in a gradual increase, you have conversations that you’re take it over. You’re improving, there are steps by which you can take to ease people into this. Okay. But you would never, I, I would never put a provision in, in an asset or a stock purchase that requires buyer to maintain the legal contracts of the seller. You’re always gonna be free to change them. And then that’s just a risk that is a risk and the buying process that you’re gonna come in and make a change and it’s gonna hurt. And initially then improve.

Mike Warkentin: (28:05)
Help. So I didn’t realize this. So let me just make sure I get this straight, because I think this’s a big deal for a lot of people. So if I buy a business and that the, the members have contracts with the original business that I buy, I can change those contracts.

Matthew Becker: (28:18)
You can. Okay. Yep. As a current and gym owner, you’re free to change the contracts. I mean, hopefully you’re also your, your membership contract has a provision. It that says you’re able to change, but as a gym owner, you’re free to change those contracts whenever you want. You’re just gonna send it out to the member and ask the member to sign a new contract. And that gives the member the opportunity to then say yes or no. Right. And that’s what you have to do is you have to give that member the opportunity to say yes or no to the change.

Mike Warkentin: (28:48)
So then at that point it becomes risk management saying where you can do the Two-Brain thing. Like how many of these people are likely to leave? Is the rate increase, going to cover the cost of those people leaving and put me in a better position? And then in some cases, I, I would guess that owners probably make, you know, quote unquote, a moral decision to say, I’m gonna honor these contracts till they expire. And I’m gonna maybe change things when they expire something like say it’s a three month, four, six-month membership contract. all of those options are in play, but you still have to consider what these contracts are. And you mentioned not just members, but you mentioned like staffing and other things as well. So there’s a whole lot of stuff that people need to look at. How do they do this? Is it just like asking the potential seller for the contracts? How does a lawyer walk you through this? And how do we, how do we like limit risk and make this smooth?

Matthew Becker: (29:33)
So we have lists that we go down, just based on our experience of you ask this question, this question, and there are other companies out there, you know, if I I’ll, I’ll plug for a moment Rig Equipment with Clayton and he has a due diligence checklist that, that he sends out potential buyers that go through and can make sure that you have all of this information. the important part of what we end up doing is we just make sure that the conversation takes place, you and say I’m. And about all this stuff. And I say, well, is the current status of the staff at the gym? Are they W2 employees? Are they 1099 independent contractors? And the buyer says, I don’t know, what’s the difference. Right? And then we have to have a conversation about the difference.

Matthew Becker: (30:32)
And then we ultimately have to talk about, you know, this, you need to go in and you not need to figure this out. They need come back to me with that information. You say, OK, well they’re 1099s. And I say, OK, do you plan on keeping them when you go in and you buy the gym and you say, well, I don’t know. I say, well, you need to figure that out – is that part of the sale that you have to keep the staff This is all part of the conversation that up having to go through with the seller. And so what we do is we walk you through this so that in the end, all of these questions are answered and all of the contracts that everybody signs, answers, all of these questions.

Mike Warkentin: (31:12)
Basically the lesson here is that when you buy or sell a business, there are contracts involved. Almost certainly. You need to figure out what they are and how to deal with them in the new, in the new era. Is that accurate? Yeah. Okay. Yeah, exactly. And that’s what, because that’s, and that’s just a lot of people don’t think of that. They maybe think of members, but they don’t think of staff or they just forget different things. and it could be like, I’m guessing there could even be contracts that involve like equipment leasing and things like that. Maybe like there’s all sorts of probably other things that people just aren’t thinking about. So the lesson here I think is checklists. And if you don’t have a checklist, which almost gym has an attorney will, especially if it’s an attorney, like you – who specializes in this stuff. So again, going back to, this is the same kind of close that we had in the previous episode. If you don’t understand what’s going on, contact Matthew. Where can they contact you?

Matthew Becker: (32:01)
Easiest way is through our website, gymlawyers.com, there’s all kinds of calls to action and, and everything else. Phone numbers, email addresses, everything right throughout the website. My cell phone is literally on the website.

Mike Warkentin: (32:33)
I wanna ask something very specific for Two-Brain owners. Are you in the Two-Brain Marketplace?

Matthew Becker: (32:40)
We are.

Mike Warkentin: (32:41)
Tell me about that because this is a really, really cool thing that Chris Cooper just announced at the Summits. That was June 4th and in Chicago, and is designed to help gym owners with visible ROI and like actually money, huge money savings. So tell me what Gym Lawyers offers in the Marketplace for Two-Brain clients.


Matthew Becker: (32:59)
So anytime a potential client reaches out to us and we a list of whatever services the of hours that’s do Two-Brain. So anytime a potential client reaches out to us, we go through a process where we basically figure out what they need service wise. And then we estimate how long, how long it’s gonna take us. And then we come up with a flat rate based on that those hours. So we might say something like it’s gonna take four hours. And it would be, you know, we charge around two an hour. So you’re looking at like $800 for the service. If you’re a Two-Brain client, you get $25 off per hour. So instead of paying that rate of, of, let’s say an hour, you’re looking at an, a significant savings as, as the services increased.

Mike Warkentin: (33:56)
Yeah. And this is exactly what Chris Cooper wanted. He wanted service providers in the Two-Brain marketplace that give clear ROI and benefit to two brain clients. So if you are a true client, get in the app, check out the Marketplace and see what’s up. And if you have legal questions, I’m gonna push you to check in with Matthew right away and see what you can get done. Matthew, I just said that when you bill me for this show, give the Two-Brain discounts. All you have to do is say, okay,

Matthew Becker: (34:21)
Right. Sounds good, Mike.

Mike Warkentin: (34:23)
Fantastic. That was Matthew Becker. He is a gym owner and he is the man behind gymlawyers.com. I’m your host Mike Warkentin. This is Two-Brain Radio. Be sure to subscribe, leave us a review. Five stars would be great. Get more episodes cuz we’re out here to help you. Now here’s a final word from Two-Brain founder, Chris Cooper.

Chris Cooper: (34:44)
Hey, it’s Two-Brain founder Chris Cooper with a quick note. The Gym Owners United Facebook group has more than 5,600 members and its growing daily. If you aren’t benefiting from the free tips and tactics and resources that I post daily in that group, what are you waiting for? Get in there and grow your business. That’s Gym Owners United on Facebook or www.gymownersunited.com. Join today.

Thanks for listening!

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