Local Orangetheory Fitness franchisee looks ahead to life after Covid-19

An Orangetheory Fitness franchisee with studios in both the Tampa-St. Petersburg and Houston areas has a unique perspective on how local governments responded to the Covid-19 pandemic.

In Houston, city leaders were more aggressive about closing businesses than in the Tampa-St. Pete area, said Jim Potesta, CEO of Afterburn Holdings, which owns 31 Orangetheory Fitness Studios and manages 54 other studios.

“Florida was a little looser than in Houston. I think a lot of that has to do with the local government. The local government in Houston was very panicked for the right reasons. Our hospital beds at one point filled up. That has since receded dramatically, but the local government, if it was up to them, would have shut the city down immediately, where in Tampa and St. Pete, you did not see that in the media with those two mayors. They were stressing the importance of masks and social distancing and following the guidelines but it was very rare that you saw the mayor of Tampa or St. Pete in the news saying we want to shut the cities completely down,” Potesta said. “Don’t get me wrong. I don’t mean to say Florida didn’t take it seriously, because it did. But just watching the news, it was a drastic difference when I would be in Florida versus in Houston.”

After being closed for several weeks, Afterburn’s studios in both states have reopened, limiting occupancy to 50 percent of capacity and with strict cleaning protocols and physical distancing restrictions.

But the pandemic has left its mark on the company. Afterburn had no revenue between mid-March and the beginning of staggered reopenings that began in late May and continued through the end of June. The company kept about 120 of its 500 employees on the payroll through the closures, with the help of a Payrolll Protection Program loan. Since reopening the total staff has shrunk to about 420 workers through attrition. The company is operating with about 53 percent of its pre-pandemic membership, and Potesta believes it could take 18 months to get back to earlier membership levels.

“I am a firm believer that there will be life after this pandemic and we will get back to normal. Jokingly, I look forward to the day when I can say we don’t have to use the words ‘new normal’ anymore because we get back to our normal way of life,” Potesta said.

“But at the same time, on a serious note, we look forward to avoiding any future pandemic and knowing that we are prepared and ready to deal with this, and not go down this road again because this is a really awful disease.”

‘Next big thing’

Potesta and his wife, Brett Potesta, are Tierra Verde residents who started their careers in the restaurant business. While Brett went into teaching, Jim opened a Carrabba’s restaurant in St. Petersburg as managing partner. He was promoted to joint venture partner to develop the Florida Panhandle region, Alabama and Louisiana, where he built and oversaw nine locations in the three states.

Jim and Brett Potesta

Approaching his 50th birthday, Jim Potesta decided it was time for a change. When he told Marty Reichenthal, his boss at the time – later, his business partner – he got an unexpected response.

“He said to me, ‘I have the next thing. It’s Orangetheory Fitness,’ ” Potesta said.

Reichenthal bought the rights to franchise all the Orangetheory Fitness studios in Houston seven years ago and after extensive research, Jim and Brett Potesta joined him in the business. “We have been on a wild explosion of growth ride ever since,” Potesta said.

In 2019, private equity firm Brentwood Associates bought a majority interest in Afterburn Holdings, and a year later Afterburn expanded to Florida in a deal that included acquiring area development rights for Tampa, Fort Myers and Naples. Currently, Afterburn owns 21 fitness studios in Houston and 10 on the west coast of Florida.

The restaurant and fitness industries have great customer service in common, said Potesta, but restaurants are a tougher business, with more competition and slimmer financial margins.

Restaurants also provide a physical product – food on the plate – while fitness is more of a service product, he said.

“One of the things Brett and I saw early on is we were making a huge difference in people’s lives,” Potesta said. People share personal stories, such as losing weight, being able to come off of heart medicine or insulin, or running their first 5K. “Things like that drive us every day.”

Above state requirements

Despite initial differences, reopening procedures in Florida and in Texas are now closely aligned, Potesta said.

Fitness equipment is separated by six feet.

Afterburn implemented identical safety protocols for its Houston and Tampa Bay Orangetheory Fitness studios when they reopened. Both employees and members get their temperature taken every day and they have to answer several questions related to Covid-19 symptoms before they can enter.  They have to wear masks as they enter the gym and as they move from station to station, although they can take the mask off once they get to their workout station.

The fitness studios have stepped up cleaning procedures.

There are designated marks on the floors and equipment to ensure people are maintaining a six-foot distance, including when they exit the gym.

“We took what the state wanted and we went above that. We wanted our members to see we take this seriously and we are doing things you don’t see at a grocery store or elsewhere,” Potesta said.

The cleaning protocols will stay, even after the pandemic is over, he said. For now, six-foot social distancing is the No. 1 thing customers are looking for to feel safe, he said.

“Of the customers that are back, I would say 99 percent of them are very comfortable with what we are doing … They understand it, they are practicing social distancing and they feel comfortable,” he said. “But for about 35 percent or 40 of our original membership base, we put their membership on a freeze until they feel comfortable coming back,” he said, adding that those customer are often older, work in the medical industry or live in multi-generational homes.

He thinks it will take as long as a year and a half for to get back to pre-pandemic membership numbers.

“If we were to see a vaccine early next year and it works and people feel safe taking it, I think it will take us a year to 18 months to get back to that number,”  Potesta said. “We’ve been social distancing for so long, that as we bring people back and go from 50 percent capacity to 100 percent, there’s still going to be that mental thing of people wondering if the person next to them got a vaccine.”

It’s also unclear if there will be long-term impact on unemployment.

“We’re seeing and hearing from our member base that there are a lot of financial issues out there,” Brett Potesta said.

The couple also worries about other businesses that may not survive the economic repercussions of the pandemic.

“They were working hard in their business every day and these kinds of shutdowns are unprecedented and people don’t have endless resources to keep businesses afloat that are unprofitable. It’s tough to see people live the American dream and have the doors shut like this,” Jim Potesta said.

“We will survive this, and we will come out on the other side. It’s a long-drawn out deal and a struggle and has its stresses every day, but we are working diligently to make the right moves to be able to come out on the other side, and we feel very confident we will be there.”