Sunday, March 29, 2020

Is the Coronavirus Killing Our Jiu Jitsu Gym Model? How We're Planning for the Future

I've been writing quite a bit about the coronavirus pandemic, but one topic I haven't broached? What effect will this pandemic have on jiu jitsu gyms in general and OUR gym in particular? Here are some preliminary thoughts, and what I'm planning to do as a result. Hopefully this will spark some discussions among gym owners and managers, and maybe help more of them survive this catastrophe.

The Current State of Affairs

As of today (March 29th), we've been shut down per our governor's orders for about seventeen days (we're located in Colorado.) While the temptation to keep rolling in secret has been nearly irresistible, we still don't understand the nature of COVID-19 to the point where we can accurately assess the risk this virus really poses. It's becoming increasingly clear China, the country most Americans have been using as a timeline for the progression of this virus, has been disingenuous at best, and have flat-out lied at worst.

EVERYWHERE else this virus has hit is still experiencing an increase in positive cases and an increase in deaths, meaning all of us are still on the upward slope of the exponential bell curve of new daily cases AND deaths. 

The problem? We have no idea WHERE we are on that curve. If it peaks tomorrow, we'll return to some semblance of "normal" within weeks. But if it keeps increasing (which would completely invalidate my prediction from a few days ago), we might be in for a truly horrific worldwide catastrophe where we could see tens or even hundreds of thousands of deaths in the United States. 

Regardless of where this is heading, pretty much every gym in the country is in the same position - we've either been forced to close or, minimally, we've closed because it's the socially-responsible thing to do based on all the unknowns mentioned above. Because let's face it - we're in a sport where transmission from person-to-person is pretty much guaranteed. If one person has the virus at the beginning of a class, by the end of class, EVERYONE will have the virus. 

To further exacerbate the problem, a whole lotta people have either been laid off permanently or furloughed temporarily, and currently have little or no income. Unless every one of a gym's students are independently wealthy, this means all gyms have a percentage of students who cannot afford to continue paying memberships throughout this closure. Given many gyms operate on very thin margins, that means a whole lotta gyms are teetering on the brink of bankruptcy and are in danger of closing permanently. 

The longer this pandemic lasts, the more people will be forced out of their jobs, the more students we're going to lose. No matter what supplemental materials a gym produces, keeping food on the table supersedes paying membership fees. And no ethical gym owner is going to enforce a contract to keep members paying who are struggling to feed their kids.

So the longer this continues, the more gyms we'll lose. And right now, there's little or no indication of how long this is going to last. This Atlantic article highlights the four possible timelines and what circumstances would lead to each scenario:

It's important for people to understand there are only two ways this ends - We either develop a vaccine (which even the most optimistic estimates assume will take 12-18 months) OR enough people get the virus and recover to the point where we develop "herd immunity", which is usually around 60-80% of the population. Until one of those two things happen, we'll be forced to continue social distancing, which means no normal training. 

However, the Herd Immunity situation is dependent on two things we currently don't know. First, if we're infected, do we then obtain long-term immunity to getting re-infected? Second, will the virus mutate enough over time where our previously-obtained immunity will be useless? As of right now, today, it appears as though people can't get re-infected (though there seem to be a few cases coming out of China that people CAN get re-infected) AND it appears as through the virus is very slow to mutate. 

Assessing the Four Timelines

One to Two Months: This scenario could happen for two reasons - one really good and one really bad. First the good. This virus may have been circulating widely for months and months in the US, and a lot of us have already gotten it, showed few if any symptoms, and are now immune. In this scenario, we're probably close to that herd immunity number. Now the bad. The virus could continue exponential growth, we have tens of millions of cases by the end of April and possibly millions of deaths caused by the virus and made MUCH worse by our healthcare system being completely and totally overwhelmed. That would be an apocalyptic scenario. BUT, we'd develop herd immunity quickly. 

In this scenario, the "good" circumstances would be the best-case scenario for our gyms. We could go back to normal training by mid-summer and continue as if nothing happened.

In the "bad" scenario, our society would be absolutely demolished for a fairly long period of time. The sheer number of deaths would have a profound impact on our economy and would likely lead to a prolonged, deep recession. And the general public would likely be too traumatized to want to start rolling around on a mat with strangers. 

In the "good" scenario, we could be reopening by June. In the "bad" scenario, we would probably re-open by mid-summer, but the societal chaos would radically alter HOW we run our businesses. Most gyms could probably survive the "good" scenario, and creative owners with some solid business chops could probably survive the "bad" scenario.

Three to Four Months: In this scenario, we either develop a test for antibodies (meaning we had the virus and are now immune) OR we develop a good treatment. In either of those scenarios, we would probably be able to get back to some semblance of normalcy, which would likely include being able to roll with limited numbers of people.

HOWEVER, and this is a big deal, the very nature of our sport makes it extremely likely we're going to be one of the last businesses that our governments allow to resume. In this scenario, which I think is probably the most likely, gyms will need to alter how they operate IF they're allowed to reopen. Limited class sizes, some documentation of a positive test for antibodies (meaning the person is presumably immune), or the member isn't in a high-risk group (or interact with anyone in a high risk group). 

In this scenario, we could feasibly reopen by the end of summer or early fall, but would require us to alter how we operate. I don't think a lot of gyms have the resources to survive this long with limited income, so I would anticipate a lot of gyms closing permanently as the owners will be forced to find other work to pay the bills and put food on the table.

Four to Twelve Months: This scenario would bring up the issue of summer. Will the virus become significantly less-contagious during the summer months(like the flu), or would it just keep on truckin' on? At this point, we have no idea. Either way, though, this is really bad for our gyms.

In the absolute best-case scenario, we might be allowed to re-open by mid-summer as the number of cases and deaths plummet, but would be forced to close again once the fall wave hit and we're forced to go back to radical physical distancing. This open-then-close scenario would probably allow some gyms to survive longer, but many will close.

In the worst-case scenario, the virus doesn't recede and we're forced to stay closed through summer and into the fall. In this case, we're basically waiting for the aforementioned herd immunity or a vaccine. In this scenario, I cannot imagine many gyms surviving unless the owners have some other significant outside income.

Twelve to Eighteen Months: This would happen if we can't find a way to treat the virus and we don't develop herd immunity (like if we can get re-infected) OR we can't develop a vaccine. This scenario would obviously be the worst case for gym owners because there's few if any gyms that can survive for a year to a year and a half without opening their doors. This would be absolutely catastrophic to our sport. Let's not think about this one too much right now. ;-)

The One Scenario We Should All Be Hoping Come To Fruition

The short-term and intermediate-term outlook for our sport is absolutely god-awful. Even in the best-case scenarios, gym owners are now under immense financial strain. The ONE set of circumstances we should all be hoping for is that we'll soon have a widespread test for antibodies our immune systems produce in response to the virus AND it turns out we can't be re-infected. In this scenario, people who test positive (meaning they had the virus and successfully recovered) could go back to semi-normal life, including training. This would save A LOT of gyms because it would limit the time we're forced to close. 

The really, really good news - some companies have already produced these tests AND the tests are already being used to screen populations just to our southwest. If both of these turn out to work as hoped AND we can't get reinfected, we could feasibly go back to some sort of training by June. 

Our Situation

We own a small gym (less than sixty members) in a small, geographically-isolated town (pop. 20,000 with another 20,000 in the surrounding county.) Our rent is disproportionately high thanks to the pot industry buying up all the commercial space, thus driving up the costs locally and we have a loan we needed to buy the gym from the previous owner.

When we took over the business, we grandfathered a lot of our students in at their previous rates, some of which were very low AND were month-to-month cash payments. We only have a handful of members who are in a position to continue paying memberships (which is an absolute life-saver), so our revenue plummeted to the point where we're now really, really far into the red.

Critically, Shelly and I are both still employed full-time AND our lease ends in July. We're absolutely bleeding money right now, but thanks to our semi-frugal lifestyle, we can absorb the hit for a few months as long as we stay employed. If we don't re-open, we should be able to continue paying our gym bills and our personal bills. It's extremely tight, but we should be able to survive. It helps that we have a significant stockpile of food at home. And guns. Don't get any ideas, grasshopper. 

If we're able to re-open by May, we'll be able to survive as we were before the pandemic, just a little more poor. If we have to wait until June or July, we should be able to re-open as we were, but will need to substantially alter our business model. If we can't re-open by the end of July, we'll be out of our lease, which will cut our gym expenses by over 75% and put us in a position to re-open in a new location and continue as we did before. And take a whole lotta pressure off us financially. 

The real problem, though? Once we're out of the woods and allowed to re-open, we'll have to contend with trying to sell this sport to a public who just went through months and months of both extreme anxiety AND social distancing. Convincing new students to start rolling around on a mat with strangers will not be an easy sell simply because we'll have to overcome the deep, emotionally-charged phobias we're in the process of developing right now, today. This is going to absolutely doom the old way of doing business for jiu jitsu gyms, and not everyone will have the creativity to develop a new way of doing business. This is a time I'm really, really glad I'm a serial hobbyist with a diverse education, have a wealth of life experiences, and excel at creative problem-solving. It also helps that I've surrounded myself with a lot of people smarter than me.

Regardless of what happens, El Diablo Combatives will survive in some way, shape, or form. More importantly, this entire event has been a huge kick in the ass for me personally. I've never liked the martial arts model our gyms use to operate; it's just not a good business model. This pandemic will likely require us to radically alter how we operate. It's an incredibly painful, emotionally-draining, scary process, but it'll fascinate necessary innovations. Which makes all of this pretty damn exciting. Tragic, but exciting nonetheless.

Of course, I could be totally wrong about all of this. Maybe all this will blow over tomorrow and we'll just go back to normal living by Easter. I personally think there's exactly zero change that's going to happen, but a lot of people are still in complete denial about the scope and depth of this pandemic. But sometimes irrational hope is easier than accepting reality and planning for said reality. YMMV.

Anyway, be safe folks. And gym owners? Expect the best. But plan for the worst. 


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