When Tony Hartl sold a majority stake in Undefeated Tribe, the Crunch Fitness franchise business he began building in 2018, the deal “made five people millionaires.”
“It was a significant, powerful experience for me,” said Hartl of being able to share the success of the company with others who had equity in the business. In a transaction announced in early October, private equity and venture capital firm VMG Partners acquired Hartl’s 16-unit Crunch portfolio, with Hartl remaining as the largest minority stakeholder and continuing as CEO with what he described as a “stretch goal” to hit 50 locations by 2025.
Undefeated Tribe operates Crunch gyms in Texas and Oklahoma, with units 17 and 18 opening before the end of the year and another four slated to open in the first quarter of 2024. Hartl has the rights to develop more than 100 locations.
It’s that runway for growth and Undefeated Tribe’s excellence as an operator—it’s gyms are “top of the system average,” said Hartl (average gross sales for the brand’s upper third of clubs was $3.45 million in 2022)—that helped attract VMG and resulted in a strong valuation for the business.
Tony Hartl is the CEO of Undefeated Tribe, a 16-unit Crunch franchisee with gyms in Texas and Oklahoma.
“They had to pay way north of fair because it’s not only what we’re doing today, it’s what we’re doing tomorrow and the next day,” said Hartl, who didn’t disclose terms of the deal.
VMG, which has offices in San Francisco and New York City, invests in consumer products and technologies, “backing exceptional founders and teams,” said McConnell Smith, a partner at the firm. Among its portfolio companies are plant-based meal brand Daily Harvest, sparkling water brand Spindrift and pilates concept Solidcore. Past investments include Justin’s nut butters and snack company KIND. Undefeated Tribe marks its entry into the franchise space.
“We’re very growth oriented,” said Smith as he described VMG’s approach to valuing a business. “Our thought process is … realistically, in five years, what do we think this business will look like. Then back into it from there.”
“Crunch is at a nice inflection point in terms of national recognition,” he continued. “And there’s a ton of opportunity for growth and to open new clubs but not feeling like we’re sitting on top of another Crunch, or even a competitor.”
Related: Crunch Fitness Wins Franchise Times Zor Award as Top Brand to Buy
VMG talked with several other Crunch franchisees, Smith noted, but knew early on it wanted to partner with Hartl and Undefeated Tribe because it’s among the few operators with scale in the system and a strong infrastructure already in place.
McConnell Smith is a partner at VMG, the private equity firm that purchased a majority stake in Undefeated Tribe.
“Tony checked that exceptional operator box immediately,” said Smith, and VMG is now helping the group recruit and install some key leaders as it prepares to accelerate growth.
Hartl said it was his best friend, Alex Chang, who convinced him to come out of retirement and co-found Undefeated Tribe. After launching and growing Planet Tan to 17 locations, Hartl sold that business in 2008 and retired at the age of 40. He spent the next 10 years traveling and raising his son, writing a book and getting into the wine business with the purchase of a winery in Argentina.
“I didn’t need to work again. I didn’t think I would work again,” he said, but upon close examination of the fitness segment and Crunch in particular—he’s known Crunch founder Doug Levine for years—he decided it was the right opportunity.
Based in Portsmouth, New Hampshire, and with more than 450 locations in 40 states, Crunch Fitness sits in the so-called High Value Low Price, or HVLP, gym segment with brands such as Planet Fitness or Blink Fitness. But, said Hartl, “just because it’s high value doesn’t mean it’s cheap,” and Crunch offers more services and amenities such as personal training, group fitness classes and hydro massage beds while keeping its membership price point down. There are $9.99, $21.99 and $29.99 tiers.
Crunch’s “irreverent, cheeky approach to branding” was another compelling factor for Hartl, who in his gyms aims to achieve a “non-intimidating but upbeat and inspiring vibe.”
Rather than enter the Crunch system by purchasing an existing location, Hartl said he “started from ground zero” by building his first unit in Killeen, Texas, north of Austin, in 2018 so he could fully understand the business. Each location costs upwards of $3 million to build, part of the reason he decided to seek a private equity partner.
“We hit the accelerator button this year” with 10 openings, he said. “It’s incredibly capital intensive to keep building at this rate, and we also wanted to have the opportunity to acquire. We could grow slower … but I saw a unique opportunity with this brand to scale.”
It was Crunch CEO Ben Midgley who made the introduction to VMG, and the firm “understands the power of the brand and the power of scale,” said Hartl. “And they see the business the way we do—that it’s people-led.”
This next stage of growth will bring new challenges and is likewise exciting, noted Hartl. “I’ll be 56 next month and I’m super motivated.”