Q&A with Steve Venezia, EVP of Development at an independent Planet Fitness franchise

Leasecake’s founder, Taj Adhav, recently spoke with Steve Venezia, EVP of Development and In-House Counsel at Core Development & Management, an independent Planet Fitness franchise currently operating 73 locations across the US. This Q&A covers a day in the life of an EVP of Development in the fitness industry, how he keeps himself organized while trying to continuously grow the business, and his tricks and tools that help him succeed.

What’s a day in the life of an EVP of Development?

My focus really is on growth. I have the good fortune of overseeing new site development, construction facilities, as well as mergers and acquisitions, and all of the legal aspects of things, on the in-house counsel side of things. 

I started focusing on business formations and real estate, and then after about 7 years, I joined the Planet Fitness headquarters as their In-House Real Estate Council, and I really just fell in love with the brand. It’s one of the fastest growing fitness brands with over 2,500 locations worldwide.

Now that I’m with CDM, I’ve taken on all the growth initiatives, including market planning, leasing, construction, facilities, acquisitions as well as the legal aspects of the business. 

How is your team using Leasecake today? 

With so many locations, we really need to understand who’s responsible for what, and Leasecake is great for that, because we can give access to our facilities team. Then they can go right in and say “Okay, who’s responsible for repairs on this?” Or, “Who’s responsible for the exterior windows?” 

We know instantly that a leak is not our responsibility, and we need to contact the landlord right away. And the landlord’s contact information is right there inside the platform. Leasecake a central repository for all the information we need, and it has saved us so much time. 

The abstraction services, too, are so critical for our organization. Leasecake gets all the details into the platform so we know exactly what is in each of those important documents, without having to dig through each one and reading them line by line. 

Working with Leasecake is a true partnership. It’s not just a vendor relationship. It’s a partnership.

Do you have any lease negotiation strategies you can share? 

I think the single biggest negotiating strategy is building a relationship and building trust with the people you’re negotiating with. I think that our industry is pretty small, and you end up interacting with a lot of the same people over and over again. And I think in those cases your word is your bond, and how you interact with people really comes through as well. I think that’s a huge part of negotiation. 

Another one is just keeping your word, which I think might sound cliche, but I really do try hard to be as honest and candid as I can be. Obviously we understand negotiation is a game. There’s bluffing, there’s exaggerating, there’s withholding information involved in negotiation. But to every extent possible, I try to be pretty candid and I think it’s paid dividends for me in the past. I think it just breaks down some of those walls. 

Leverage is another huge component for me. I think it’s understanding who has the leverage and where the leverage points are, because I think in each facet of the negotiation there’s a different leverage point, and there might be a different player who has leverage. So you really need to understand what your position of strength is and what their position of strength is.

For example, you may know that a space has been vacant for 5 years, and inherently that gives you a place of leverage. But then you learn that the landlord had multiple opportunities to lease it. They don’t have a mortgage on the property, and they’re not in a rush to rent the thing. So maybe you didn’t have as much leverage as you thought there. 

I think it’s just collecting that information and understanding that there’s a push-pull there. If you understand the other side’s key goals as well as your own, you know where you can compromise. So hopefully, those are symbiotic, and you can give where they need you to give, and they can give where you need them to give.

I think probably the most important thing, especially for younger people, when negotiating, is to pick up the phone. Pick up the phone. ‘m a lawyer by trade. I negotiate my own deals. As a rule, I don’t like to email a red line back and forth more than 3 or 4 times, because at that point you should know whether you can get a deal done or you can’t, and it’s time to pick up the phone. I do think that some of the younger generation is afraid to do that. And I think it’s really important, because again, just that explanation on that phone can really break down a lot of walls. It is a faster way to understand why they’re saying no, or let them understand why you need what you need. 

Is there a typical lease term you look for? 

We generally try to align our lease terms with whatever the franchise agreement term is, because you have the right to operate for that long. I love having as many options as I can get on the tenant side, especially if they’re not fair market value. If there’s a predictable amount of money that you’re paying, I think the options never hurt the tenant. And so ideally I would like 4 renewal options if I can get it. There are larger retailers who will get 20, so they’ve got control for 100 years. 

Are there ways you get creative with a landlord on structuring a lease?

There are generally 3 economic levers of a lease: the rent number, the tenant improvement allowance and the delivery conditions. The important thing is just understanding where you’re coming from. If the lease needs to be a longer term to make something make sense, that’s an option.

I think what we’re seeing more recently with interest rates going up, landlords are a little less willing to write a check than they used to be, because that capital costs more than it did. And with the supply chain delays and the construction costs going up, we saw landlords less willing to build out. 

In terms of the delivery condition, the more work the landlord does, the less we have to do, and the less it costs us. So it’s really all about balancing those 3 levers. It all goes back to understanding what your needs are, understanding what the landlord’s needs are, because everybody’s gonna model these things out. Everybody’s gonna put an ROI together to see if the economics work. 

That’s where maybe you can be a little candid. It’s still a negotiation, but you can be a little candid and say, “Hey, you know I need this much in tenant improvements (TI), or I just can’t make this deal work.” I’ve done that on several occasions, and we’ve been able to get creative.

The other thing is free rent. If somebody can’t do a TI, maybe you can have a free rent period of some length, where you’re not paying rent. For us that is generally when we’re ramping up our clubs. The membership grows initially, and that period of free rent can be very helpful as well. 

What’s the typical free rent period where you think, “Wow, that was a really good deal for us?”

I have to go back to that lever thing, right? It all depends but I would say certainly 6 to 12 months is a reasonable amount of free rent just to allow that to happen. But again, that depends on what the delivery conditions are, what the tenant improvement allowances, things like that. It’s all working those levers to make it work for both parties.

What do you think about percent rent? 

We don’t usually do it, because we’re a little bit of a different model. I think it’s a great solution for a lot of retailers, because again it’s kind of a symbiotic relationship, right? With percent rent, as that retailer grows, they’re gonna be paying more rent, and they may not be bothered by paying more rent because they can afford more rent.

I think with percentage rent, you just have to be very careful. You need to understand what you ultimately can afford. Do you put a cap on how high the percentage rent can get if you’re wildly successful? I think there’s an expectation there. You don’t don’t wanna go crazy over fair market value. And then on the landlord side you gotta be careful, too. Because if this is gonna be an underperformer, or you gotta worry about that, because they’re not gonna be paying that fair market rent.

Why did you choose Leasecake?

I think it’s just about focusing on organization and creating that central repository for that information for us. We’ve been fortunate enough to grow from 38 clubs to 73 in about 3 years. 

We did that largely through acquisition of other franchisees in the system, smaller franchisees, and every time we do that we have to review all of their information, and it’s not always easy to review. 

Using Leasecake, I have everything readily available. So if and when we ever get to the point where we’re on the sell side, we’re ready to go. If we’re dealing with financing, we’re ready to go. We have all that information available from abstracts to accounting to maintenance, contact information, a critical clause, we have everything ready to go.

So Leasecake allows you to do more with less?

Yes. Our whole back office is about 24 members for 73 locations. And that includes some of the higher level operations folks. So we operate pretty lean. But again, the tools that we use that we utilize allow us to operate lean.

The time that would have been spent doing the things Leasecake does for us is absolutely critical, and one of my personal favorites is the lease abstraction. 

I look at the amount of time that I would spend putting all the data into Leasecake, the abstraction things like that. Now, I send it to abstraction, and I get a notification, usually within a pretty short period of time, that the data is in there and it’s ready to go. 

I have my lease schedule there. We have the accounting components in there. My team can go in there and find everything they need. And it’s wonderful.

What other kinds of systems have you used to manage your leases prior to Leasecake?

At Planet Fitness, we were using Salesforce, because that was the sort of CRM there. They  wanted to create a lease management system, and because it’s a publicly traded company, there was Sarbanes Oxley, and they needed certain protocols and procedures in place. So they kind of went backwards and built up that system. 

It was clunky, to say the least. It really was not intuitive. It didn’t allow for automation. It didn’t allow for easy information review and exportation. So compared to Leasecake, it’s night and day, really.

Leasecake definitely does work for you. I think that the level of organization in Leasecake is critical. For our organization, I’m looking at lease renewals, and when I go to renew a lease, I have my deadlines. 

I never miss a deadline, of course, because I get my reminders, my notifications, things like that. 

I can go on my Events tab and I can look at okay, what’s coming up in 2 years? What’s coming up in 3 years? What’s my rent schedule look like? Do I want to look at potentially relocating that place? How do you know? What do I want to do to renegotiate an option renewal, do I just wanna exercise my option renewal?

There’s so much that goes into the real estate planning part of the game and the market planning part that is readily available right there that saves so much time and energy. And Leasecake is sort of a one-stop-shop.

What’s the timeframe that you want to get a proactive notification on a renewal coming up?

It’s interesting. I probably want a staggered approach: 2 years, 1 year, 6 months from the lease renewal deadline. Not just the least expiration, of course, but the lease expiration is critically important. It’s so important to assess, because real estate doesn’t move all that fast. 

So if you’re making a strategic decision about a location, you want to liaise with your operations team, you wanna liaise with finance. You want to understand what market terms are. You want to have an opportunity to go look at a potential relocation, or maybe you want to expand something like that. 

So you want to engage that landlord or landlords, or your brokers, or whomever early on in the process to get that going. If you have to give a notice, sometimes that’s 9 months to a year in advance of your renewal. You have to be 18 months out from expiration at least to start to identify what you want to do there.

Let’s talk about that due diligence process: How do you gather information to make sure that you’ve got these clean deals?

That matters in all aspects of the business, whether it’s the legal aspects, the real estate accounting, all of that. I’ve dealt with all different aspects of deals, M&A and whatnot, both on the buy and sell side, and I think that leasing is often the most difficult and time consuming element of it. 

I think the organization of information and those abstracts are critically important, because you do need to understand those issues, the assignment language, when you’re dealing with landlords. You need to understand what those leases say, what it allows you to do. More often than not, if landlord consent is required, their hands are going to be out for potentially something in connection with that deal. 

So I think that due diligence is so important. I’ve dealt with the horror story side of those things, because I have to abstract all those leases. Generally speaking, in the past when we’re looking at an acquisition target, I need to understand all that because they don’t have Leasecake right? And it would have been great if they did. 

From a planning perspective, just from a knowledge perspective, going in with your eyes wide open, of the risks associated, all of that stuff is so important. You know quite frankly, I wish all of my acquisition targets had Leasecake. It would make it a whole lot easier.

How much time savings can you estimate for due diligence during acquisitions when you have that information in order?

If you’ve got that information in order, it could be weeks. You’re talking about a huge time savings and a huge cost savings. If you’re employing lawyers to do that stuff, even if you’re trying to do it internally. Ultimately, there are lawyers negotiating those terms, and if you have that stuff organized, you’re saving time, you’re saving money, and you’re moving the deal forward.

Steve and the team at Core Management & Development have been Leasecake customers for three years. They use our real estate and location management platform to help them keep track of every lease detail, date, and dollar for their growing business. As a single source of truth, all of the information is available at the click of a button to their entire team, no matter which physical location they happen to be in.

To learn more about Leasecake’s platform and how we can help you grow your business, manage multiple locations, save money by understanding exactly what’s in your documents, and minimize the risk of overpaying or missing a lease renewal, schedule a demo.