Need An engagement letter addressed to Ricardo Cruz, CEO of Ascendancy Climbing Gym

A SINGAPORE HOTEL ROOM RICARDO CEO MARGO COO CHARLIE HEAD OF BUSINESS DEVELOPMENT KIAN WHILE VISITING THE THRIVING ASIAN MANAGER OUTPOST OF HIS CLIMBING GYM CHAIN, LIVERPOOL ASCENDANCY. RICARDO LEARNS OF TROUBLE ELSEWHERE EMILY HEAD OF PROGRAMMING RICARDO RUIZ COULDN'T fall "I wouldn't have called if it CASE STUDY asleep. It was his third trip to weren't serious." Singapore-he'd initially come Ricardo snapped out of his Did We Expand to scout locations for the first fog. "What's wrong?" he asked Asian outpost of his climbing-gym his heart racing. Had something chain, Ascendancy; had returned happened to his family? Was there Too Quickly? for the grand opening a year ago; a company crisis? and was there now to check on "It's Ascendancy Liverpool," operations. But the 23-hour flight Margo said, referring to the by Simon Greathead from Raleigh, North Carolina, via company's second UK location, San Francisco hadn't gotten any which had opened three months easier, and the founder and CEO earlier. "A novice climber didn't still found the jet lag brutal. tie in correctly, fell from 15 feet, He had just given up and hurt his back, and is suing us for gotten dressed when his phone E4 million." rang. It was Margo Little, Ascen- "Didn't he sign the waiver?" dancy's COO. "Of course he did. Our HBR's fictionalized case studies present problems "You remember I'm in Singa- lawyers say it's a ridiculous claim faced by leaders in real companies and offer solutions pore, right? And it's the middle of and will be thrown out. But it's from experts. This one is based on the Ivey Publishing Case Study "CircusTrix: The Ups and Downs of the night here?" Ricardo said in all over the press. He says we International Expansion* (case no. W16832-PDF-ENG). a teasing tone. The two were not didn't adequately warn him of by Simon Greathead, Case Lawrence, and Jonathan only colleagues but old friends the danger or give him enough Richards, which is available at HBR.org. and climbing partners. instruction."Exp OUR LIVERPOOL AND CARDIFF GYMS HAVE BEEN SLOW OUT OF THE GATE marketing campaigns worked as Ricardo had called a meeting well as the U.S. ones? Why aren't at the gym with Margo, who sales doubling month to month was also still on-site; Charlie like they're doing in Singapore? Saperstein, the head of business Why aren't we getting the same development, who was Skyping influencer traction we have every- in between visits to potential where else?2 And why on earth locations in Amsterdam; and Kian would any reporter think that a Chambers, whom they'd hired to guy who fell because of his own oversee Ascendancy Liverpool. carelessness deserves a story? Ricardo turned to the local I don't understand this market." manager first. "Kian, you know Ricardo ran a callused hand this market best. What do you through his hair. He'd been wor- think is going on?" He sensed the ried about the UK gyms too. That's young man's hesitation and gave why he hadn't slept on the plane: him an encouraging nod. "Please HONESTLY. RIC. I'M P&L review. speak frankly." STARTING TO THINK WE "Let's focus on the problem at "Well, like I said when we CAME AT THE UK TOO FAST. hand-damage control," he said. started, climbing is just catching "Send me the statement, and I'll on here.3 My mates and I have review it ASAP. I'll also book a been doing it for years, but most "But we follow the exact same flight to Liverpool. It sounds like lads my age do footie or rugby or procedures in every gym" -after I should be on the ground there. cricket for sport, and the fitness 10 years, Ascendancy had 35 You too. We'll discuss the bigger people are used to just treadmills thriving ones in the United picture then." and machines. We've got to edu- States, plus three international Ricardo ended the call. He felt cate them, right? Plus, it's winter; locations-"and we've never had sick, and it had nothing to do with when it's dark by afternoon, a problem before." jet lag. After all of Ascendancy's people don't get out as much. "I know. We're highlighting domestic success and the recent Even the athletic ones settle that fact with reporters and on win in Singapore, had the team down for a pint at home or at the social media. I called to get you grown overconfident about its pub. And I know the lawsuit is to sign off on a statement. But I'm ability to conquer new markets? over, but I think it created a bit of worried that Liverpool will take a a scare and maybe some worries big hit. Maybe Cardiff too. Given that this big American company how slow out of the gate those A HEATED DISAGREEMENT was more interested in making a gyms have been, we can't afford a Ricardo was still in Liverpool few quid than providing a quality PR crisis." She hesitated, and then a week later. The climber had experience. We get lots more spoke again. "Honestly, Ric, I'm withdrawn his lawsuit following questions about safety now, starting to think maybe we came reports that he had previously especially from mums. It's gotten at the UK too fast." injured his back in a nightclub even harder to fill the youth "What do you mean?" the CEO brawl and had tried to sue on that classes." asked. "This is one incident." occasion, too. But the gym still Ricardo grimaced. Young "Yes. But it's another warn- wasn't attracting the crowds the adults, teenagers, kids-they were ing sign. Why haven't our UK team had counted on. Ascendancy's bread and butter.Experience WE JUST NEED TO I'VE ALSO FOUND ASCENDANCY LIVERPOOL. GIVE IT MORE TIME. TWO AMAZING SITES THE FOLLOWING WEEK IN AMSTERDAM MAYBE WE SHOULD HIT PAUSE ON OUR INTERNATIONAL CLIMBING IS JUST EXPANSION. CATCHING ON HERE. WE'VE GOT TO EDUCATE PEOPLE ABOUT IT. RIGHT? CLIMB! KIAN, YOU KNOW THE UK MARKET BEST. WHAT'S YOUR TAKE? MAKE SURE WE UNDERSTAND THE MARKETS WE'RE RICARDO CONFERS WITH HIS TEAM ENTERING. Charlie jumped in. "We knew "We can't open another gym there "That's not how we operate," there would be challenges. But soon enough. I've also found two Margo said, bristling. "Each gym 4. Are these we picked Liverpool precisely amazing sites in Amsterdam needs to recoup 20% of its initial criteria because climbing gyms are new There's a huge advantage to capital investment within a year adequate? What there, because it's not saturated being a first movers-making and cover its operating costs other data might Ascendancy take with competitors, because we sure people get to know climbing within two.6 We're not on pace into account? could start and lead the trend just through our walls and equipment to do that here." She gestured like we did in our U.S. cities.' and classes. We just need to give at the three-story expanse of 5. Some studies When the executive team had Liverpool more time." undulating gray across from have shown that begun its international push, "Cardiff too?" Margo chimed the table where the group sat. a company can the criteria for site selection in. "The numbers there are just Only two climbers were on it, gain a significant advantage by had been simple: The company as bad." gripping Ascendancy's signature being the first looked for markets with English "They're not bad-they're just neon holds. big player in its as the primary or the dominant not quite as good as we typically "That's how we've done it in sector or geog- secondary language and with see," Charlie replied. the past," Charlie answered. "But raphy through technology city-plus-suburb populations of Ricardo frowned. "Not quite as we've gotten some bad press here. leadership or more than 2 million and two or good" was unlikely to satisfy the When you're working in new the acquisi- fewer existing climbing gyms; chain's private equity investors. countries, different issues crop tion of prime populations of more than 1 million "With the growth we're up. Maybe we need to be more resources But and just one existing gym; or seeing in Singapore, and with the flexible with our overseas oper- experts note that first movers have more than 400,000 people and no success of the new Providence ations-shift the goals and the a mixed track gyms.4 Liverpool, with more than and Nashville gyms-and maybe model to a portfolio approach."7 record, and often 2 million residents in the metro- Amsterdam, Manchester, and Or maybe we should hit it is followers politan area and only two small Dublin next year-we can make pause on our international who succeed in climbing centers, had fit the bill. up for the slow start in Liverpool expansion-take a little more the long term. "That strategy is working in and Cardiff," Charlie said, his time to understand the markets Singapore," Charlie continued. enthusiasm undimmed. we're entering," Margo retorted.J.al ASCENDANCY RALEIGH. WHAT'S GOING ON LATER THAT MONTH WITH AMSTERDAM? CHARLIE WANTS ME TO SIGN A CONTRACT THIS MONTH AND START ARE YOU COMFORT ABLE A MIDDAY CLIMB DISTRACTS RICARDO CONSTRUCTION MOVING THAT QUICKLY? FROM HIS QUANDARY-BRIEFLY. IN THE SPRING. "Perhaps consider more factors As Margo took calls from vari- former and ate a few energy bars than language, population, and ous local managers on the way to at his desk. competitors, and start way earlier the airport, Ricardo replayed the Suddenly he heard cheering 6. Is this a on the education and outreach earlier discussion. He couldn't from below. It was the first day of reasonable that Kian talked about. This is a imagine telling the board that he his kids' December school break, per-location $50 million company now. Why wanted to change the company's and his wife, Emily-who was also hurdle rate? would we change the model that's accounting practices to allow for Ascendancy's head of program- 7. What are the gotten us to this point? It's the more-modest single-gym targets, mings-had brought them in for pros and cons aggressive growth plan we should nor could he see suggesting that an afternoon of climbing. of changing be rethinking." the global strategy they'd approved "Just in time!" he shouted the individual- "And let rivals like Kilimanjaro the previous year needed to be as he grasped the final hold and location ROI requirements? and Triple Peaks pass us? They're completely revamped. Neither slapped the top of the wall. The looking at Europe too." was a good option. kids continued cheering as he 8. How "I get the urgency, Charlie," rappelled down and high-fived much should Margo said. "But I don't think him on the ground. Ascendancy we need to move quite as fast as KIDS ON THE WALL Can you stay and watch for a worry about you're suggesting." What Ricardo loved most about bit?" Emily asked. competitors? Ricardo had never minded climbing was that it required so "Sure." Ricardo smiled; his 9. With his having his team engage in heated much focus you couldn't think enthusiasm for the sport had wife as head of debates, but he saw that Kian was about anything else. Toe on this rubbed off on the family long ago. programming starting to look uncomfortable. foothold, hand on that jug, find "Fifteen minutes here, a quick and an old friend "OK, you two," he said. "It's another hold, stretch for the next shower, then on to my next call." as COO-both also enthusiastic clear where you stand. Charlie, grip. He was on one of the tough- Once the kids were tied in and climbers-does go ahead to your next meeting. est routes at Ascendancy Raleigh climbing, Emily turned to busi- Ricardo have Margo, we have a plane to catch. and was almost to the top. If it ness. She had taken the day off, enough diversity And Kian, let's get you back out was a choice between climbing but the company's UK challenges on his executive team? on the floor." and lunch, he always chose the were worrying her, too.Experience "What's the latest on Liver- pool? The last I heard from Kian, classes were still at 50% capacity." "It's slow," Ricardo answered. "Is it fallout from the lawsuit? Or are the English less into climb- ing than we thought?' Ricardo hesitated. "I'm really not sure. We've upped the market- ing. Kian is working his connec- tions. But it's just not picking up." 'And Cardiff?" "Slightly stronger. But not like here or Singapore." "What's going on with Amsterdam?" Charlie just emailed. He's negotiated two potential con- Should Ricardo press on tracts. He wants me to visit this week, sign one this month, prep the site this winter, and start with or pull back from his construction in the spring." Are you comfortable moving international expansion plans? that quickly?" Ricardo looked at his seven- year-old son, who was already THE EXPERTS RESPOND high up on the wall. Mateo was a risk-taker, trusting his gut and usually ascending in record time. Maya, 10, was more cautious. She When you're trying to expand globally climbed at about half Mateo's pace as a boutique fitness business, like the but never slipped or fell. ANTHONY GEISLER Is brands my company owns, it doesn't In climbing and in business, the CEO of Xponential make sense to plant your flag in multi- Ricardo had always been like Fitness. ple countries at once with one or two Mateo. But he was starting to won- locations in each. You should choose the der if under Ascendancy's current geographic market that best suits your circumstances, Maya's strategy business and focus on winning it. made more sense. Ascendancy doesn't If Ascendancy Singapore is a success, necessarily need to Ricardo should open more gyms there- SIMON GREATHEAD Is a as many as the market can handle. professor at Brigham Young slow down-but it does It's a cosmopolitan, English-speaking University's Marriott School of country, and the company has already usiness. need to focus. worked through the typical bankingand technology hassles associated with Climbing gyms have obviously launching abroad. DAVID SPIGNER /S caught on in the United States and, for Ricardo might want to expand in the the president and CEO whatever reason, in Singapore. But the UK as well, provided he can diagnose of Boda Borg, a chain UK is a different market. The Dave & and solve the problems in Liverpool and offering physical and Cardiff. Ascendancy seems to have a mental game experiences. Buster's restaurant-and-arcade chain discovered that fact during its unsuc- good recipe; it needs to make sure its UK cessful foray into the country: English gyms are following it. In a membership- people accustomed to intimate pubs based business, you want to dive into Ascendancy needs to take may not have understood the massive sales-lead flow, closing ratio, and attri- entertainment venues it was opening. tion to see where locations are falling a step back and reassess At Boda Borg we are fortunate to short. If the idea is to pull people in for its expansion plans. have a product, Questing, that appeals parties, corporate events, and seasonal across broad demographics and cultures. classes, you need to look at where and When and where is speed strategically Before my investment group acquired how you're advertising and what's work- necessary, and where is it not? the company and I became CEO, in ing and what's not. The company might Some retail businesses pursue a pred- 2008, I visited its location 150 kilometers interview customers who are leaving to atory strategy-establishing footprints from Stockholm and was shocked to see determine why. all over the place to thwart would-be people from five countries. On another If Ricardo and his team learn that competitors who could duplicate their visit I saw two busloads of church ladies demands and desires are different on offering- even if that means operating arrive. We work hard to understand why that side of the Atlantic, it might be unprofitably for an extended time. people fall in love with our product and wise to bring on a local partner. That's But if you feel that urgency, you'd to replicate its success in new locations. why our company operates under a better have something you know Although Questing is brand-new franchise model. The people who run people in your new locations will get to most people and nearly impossible our hundreds of Pure Barre, Club Pilates, excited about. I'm told that this case to fully explain, the percentage of CycleBar, StretchLab, Row House, AKT, study is based on one about trampoline our guests who are exhilarated by the YogaSix, and Stride studios across the parks, which makes sense. Everyone experience and share their enthusiasm United States are embedded in their knows how to bounce, and kids love through word of mouth is extremely communities. Our international partners it, so it's easy to pitch that as a leisure high. So a new Boda Borg location in a have extensive experience bringing activity in many different geographies. well-targeted geography easily serves American brands into their markets, and Ascendency's gyms could be a much as a massive marketing vehicle for new they sign on to take our entire portfolio harder sell, especially where the activity guests and future expansion. across their respective countries. isn't well-known or broadly practiced. Our strategy is long-term: We want to If Ascendancy wants to maintain Climbing is niche and requires far greater be sure that our product remains highly corporate ownership over all its locations levels of skill and commitment. So as attractive today and in the future, and and keep going in the UK and Singapore, Ricardo and his team consider their we believe it is hard for others to dupli- I would strongly advise adding a new expansion plans, they need to factor in cate. So we have been extremely patient layer of management: country manager. not only basic criteria such as market over the past 11 years in deciding where You want boots on the ground, not just size, core target demographics, and the and how to grow. We now have seven for a week but all the time. I would also competitive landscape but also whether locations in Sweden, one in the United encourage the team to use more data the population includes passionate States, and one in Ireland. We want to in deciding which cities and neigh- climbers who will frequent the gym and ensure that Boda Borg is as strong every- borhoods are suitable for expansion. perhaps encourage others, including where as it is in our core locations. That Surveys can determine who the gym's novices, to do the same. means we take a good long look at new core UK and Singapore customers are It's critical to understand why markets and partners before we act. and where people like them live. people may or may not engage in I would encourage Ascendancy to Ascendancy needs to take Amster- an experience. Ascendancy might slow down and do the same. @ a table for wuld look