Would you consider this to be ethical?

[Xeon]

I came across this incident in my life, and am curious to know what others here think.
Here's the scenario:

1) John goes to work at ABC gym, located at the ground floor, as a fitness trainer.

2) He works there for multiple years, gradually getting to know the regulars at the gym, has them on his FB and whatsapp.
In addition, he also learns about the running of a gym, the operations, the ins-and-outs of everything.

3) 4 years later, he opens his own gym, located just above ABC gym.
The setup of the gym, the gym packages, the website information layout and categories, the gym schedule and training classes etc., is 90% identical to ABC gym.
On the opening day, some of the gym regulars John knew from ABC gym went to his gym, to support him.

Is this considered a normal thing in business? Is this ethical?

I've been asking myself this; my gut feeling tells me something just feels wrong with the way this is executed, especially the fact that John's new gym is located just above ABC gym.
It's not entirely "black", but kinda "gray".

What do folks here think?

* Note: I'm currently a regular of ABC gym.

 

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[Lyinx]

Let's break it down, shall we?

ABC gym has X amount of customers

Is ABC gym limited by the amount of space? or are they adding more customers?

If ABC gym is not limited by space (if they have room for more customers) then is the location maxed out with it's potential (in other words, they have all the customers that they can get, and no matter the amount of advertising, they won't get many more customers)

You say John is duplicating ABC gym.
You say John is taking some of ABC's customers.

If John would be providing unique opportunities not provided at ABC gym (physical training otherwise not available/ specializing in a certain type of training/etc...) then I wouldn't see a problem with it (providing he had his old boss's approval)

the way I see it:
limited amount of customers (they are taking the amount of customers available, and dividing it by two floors)
so that means, they (John + ABC gym) are paying 2X the amount of rental for the properties than they were before
John + ABC gym, now has twice the amount of equipment that they had before
John + ABC gym have the same amount of customers but have doubled up on space, rent, and equipment. How long do you think that they'll last?

One of them will go out of business soon, because they will run out of money. and then the other one will get the business from the 2nd place, and be able to buy the equipment for pennies on the dollar if they want any of it.

Let me guess: John took out a loan to buy and setup everything. ABC has already paid off their equipment and setup loans. John will go bankrupt within a year if he does not get new clients outside of ABC gym or work on a unique training program or specialty. ABC gym will benefit from the extra customers that John brought in (if any) and they will switch to ABC when John goes out of biz.

Just my $.02, the above obviously wouldn't happen under a few situations:
1. John is training a specialty that was not available at ABC (not according to your notes)
2. John is attracting new customers (if ABC was running out of room, John would be the overflow)

 

[Kevin88660]

I came across this incident in my life, and am curious to know what others here think.
Here's the scenario:

1) John goes to work at ABC gym, located at the ground floor, as a fitness trainer.

2) He works there for multiple years, gradually getting to know the regulars at the gym, has them on his FB and whatsapp.
In addition, he also learns about the running of a gym, the operations, the ins-and-outs of everything.

3) 4 years later, he opens his own gym, located just above ABC gym.
The setup of the gym, the gym packages, the website information layout and categories, the gym schedule and training classes etc., is 90% identical to ABC gym.
On the opening day, some of the gym regulars John knew from ABC gym went to his gym, to support him.

Is this considered a normal thing in business? Is this ethical?

I've been asking myself this; my gut feeling tells me something just feels wrong with the way this is executed, especially the fact that John's new gym is located just above ABC gym.
It's not entirely "black", but kinda "gray".

What do folks here think?

* Note: I'm currently a regular of ABC gym.

From a business level no, unless there is specific employment contract clause against him poaching clients from ex-company.

From a personal level, it really depends on his relationship with his former employer.

 

[100k]

All is fair in love and warfare.

Business is war.

Do as thy must.

Isn't that Burger King's "whole" business model... they literally open up opposite wherever McDonalds opens up.

 

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[JacobBW]

I've been asking myself this; my gut feeling tells me something just feels wrong with the way this is executed, especially the fact that John's new gym is located just above ABC gym.
It's not entirely "black", but kinda "gray".

Ethically, I’d say it’s definitely in the gray area.

Legally it might be fine - yep @Kevin88660 - depending on the contracts in place, and then yes @100k all is fair in love and war (and business)...

If our ethics are what we would do if nobody was watching, then they’re all kinda fluid and we will all be somewhere along the spectrum.

Assuming that it’s fine legally, his actions are still being judged, and weighed against your (and everybody else’s) standards.

Some will be ok with it, some will decide that he’s a snake and won’t trust him afterwards. But if it doesn’t sit right in your gut, then there’s probably a good reason for it.

 

[Odysseus M Jones]

I came across this incident in my life, and am curious to know what others here think.
Here's the scenario:

1) John goes to work at ABC gym, located at the ground floor, as a fitness trainer.

2) He works there for multiple years, gradually getting to know the regulars at the gym, has them on his FB and whatsapp.
In addition, he also learns about the running of a gym, the operations, the ins-and-outs of everything.

3) 4 years later, he opens his own gym, located just above ABC gym.
The setup of the gym, the gym packages, the website information layout and categories, the gym schedule and training classes etc., is 90% identical to ABC gym.
On the opening day, some of the gym regulars John knew from ABC gym went to his gym, to support him.

Is this considered a normal thing in business? Is this ethical?

I've been asking myself this; my gut feeling tells me something just feels wrong with the way this is executed, especially the fact that John's new gym is located just above ABC gym.
It's not entirely "black", but kinda "gray".

What do folks here think?

* Note: I'm currently a regular of ABC gym.

Did John sign a non compete agreement?
Did he steal any propriety/copyrighted/trademarked property?
Didn't he invite you to join his gym?

 

[Stargazer]

I would venture that 99.9% of people who open gyms were gym members elsewhere.

Moreover, they would have mentioned to all and sundry that they were going to open a new one.

And some of those members would have shifted to the new one.

So there is nothing particularly unusual there.

If the person was an Instructor there, then there is probably some clause that s/he needs to compensate the original gym for each client taken. Same as hairdressers. How easy that is to put into practice is...

Equipment in gyms is more or less universal so nothing propriety there as gyms get their kit from suppliers who by default supply dozens or hundreds of other gyms.

Having said all that there is a flaw in what you have written. Well depending upon the 10% that is different, that is the key.

If you told me you were going to start a new gym and it was practically the same then what is the advantage of moving?

With in a certain radius of that gym, anyone attracted by its offering and pricing has already joined. So you are splitting that membership which would lead to loss for both gyms.

That is why you don't tend to see a 24 hour gym box next to another one or a Power Lifting Gym next to another one but you will see a Power Lifting one survive next to or close to a 24 hour gym box.

Different markets in the same radius.

So yes it is ethical but the 10% is crucial. Having blue benches instead of green and a pot plant isn't a good enough 10%

Dan

 

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[SEBASTlAN]

Pretty shady imo. I know a guy who did it and ruined his reputation as a result, but if you have no problem with it then proceed.

 

[sparechange]

Are you going to open up a gym?

Who cares? If you build a better mousetrap and sell it that's good. No one has a gun pointed to their head to do business with anyone.

 

[Xeon]

Let's break it down, shall we?

ABC gym has X amount of customers

Is ABC gym limited by the amount of space? or are they adding more customers?

If ABC gym is not limited by space (if they have room for more customers) then is the location maxed out with it's potential (in other words, they have all the customers that they can get, and no matter the amount of advertising, they won't get many more customers)

You say John is duplicating ABC gym.
You say John is taking some of ABC's customers.

If John would be providing unique opportunities not provided at ABC gym (physical training otherwise not available/ specializing in a certain type of training/etc...) then I wouldn't see a problem with it (providing he had his old boss's approval)

the way I see it:
limited amount of customers (they are taking the amount of customers available, and dividing it by two floors)
so that means, they (John + ABC gym) are paying 2X the amount of rental for the properties than they were before
John + ABC gym, now has twice the amount of equipment that they had before
John + ABC gym have the same amount of customers but have doubled up on space, rent, and equipment. How long do you think that they'll last?

One of them will go out of business soon, because they will run out of money. and then the other one will get the business from the 2nd place, and be able to buy the equipment for pennies on the dollar if they want any of it.

Let me guess: John took out a loan to buy and setup everything. ABC has already paid off their equipment and setup loans. John will go bankrupt within a year if he does not get new clients outside of ABC gym or work on a unique training program or specialty. ABC gym will benefit from the extra customers that John brought in (if any) and they will switch to ABC when John goes out of biz.

Just my $.02, the above obviously wouldn't happen under a few situations:
1. John is training a specialty that was not available at ABC (not according to your notes)
2. John is attracting new customers (if ABC was running out of room, John would be the overflow)

Very deep and interesting analysis. There are some details I missed out in my first post:

1) John is duplicating ABC gym, and at the same time, adding about 2x types of new classes ABC gym doesn't have, including cardio classes. However, it's not difficult for ABC gym to come up with those classes that John's gym currently has. In fact, knowing ABC gym quite well, I would say they can do that within 2 weeks.

2) I'm not sure if John got the nod from his ex-boss, but it's common sense to say John's ex-boss won't agree. Who would? lol It's clear as day this is direct face-on competition.

3) John's new gym seems to be attracting customers that have never been to ABC gym.
John may have pulled them in from sources unknown and unused by ABC gym.
It still remains to be seen how many of ABC gym's existing customers will eventually go over to John's new gym, because many of them are still under ABC gym's membership packages and their packages have not expired yet. Every place has their own "vibes". ABC gym's boss tends to attract expats and people of a particular ethnicity, while John's personality and background seems to attract locals more. That being said, there is a major overlap in both their customer bases.

4) ABC gym is not running out of room and can still take in more customers, so the issue of overflow doesn't apply here.

5) Here's the ultimate kicker I missed out: John's new gym is about 4 TIMES the size of ABC gym. This means the rental is going to be expensive as hell (especially in a country like Singapore).

6) John's gym started in Jan this year, while ABC gym has been in business for 13 years.
However, John is better at building a community and keeping them engaged, ABC gym is not.
Between the two, I would say John's gym will eventually have better customer retention rate in the long term, assuming the rental doesn't kill John.

Having said all that there is a flaw in what you have written. Well depending upon the 10% that is different, that is the key.

If you told me you were going to start a new gym and it was practically the same then what is the advantage of moving?

With in a certain radius of that gym, anyone attracted by its offering and pricing has already joined. So you are splitting that membership which would lead to loss for both gyms.

That is why you don't tend to see a 24 hour gym box next to another one or a Power Lifting Gym next to another one but you will see a Power Lifting one survive next to or close to a 24 hour gym box.

Different markets in the same radius.

So yes it is ethical but the 10% is crucial. Having blue benches instead of green and a pot plant isn't a good enough 10%

This is the part that puzzles me. Why would anyone start a new gym just above the old gym he works in? It's not as if there's no more places to start a gym here. Unless......ABC gym's boss pissed off John so much that he did this out of vengeance to make a point. Like how Lamboghini started out just because the boss was pissed off at Ferrari's boss (if I remember the story correctly).

Are you going to open up a gym?

If I'm John, I wouldn't be typing all these here lol.

 

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[Lyinx]

Based on your answers, I'd say it's without a doubt fulfilling a need that was out there, the only questionable choice is being located next to the ABC gym.

ABC gym might actually end up being the winner here, as they'll get John's overflow or people looking for a different membership (for example, if John's prices would be higher)

From your answers, John has a few things going for him:
1. new classes
2. new customers
3. better community

Downside? the higher rent. John will need to compensate by increasing prices, unless he can fill it to the max immediately.

IF John can get a lot of feet-through-the-door traffic, and IF he can train people to help him ASAP, and IF he can develop the community fast enough to keep people there, then he'll be off to a good start.
If he misses any of the above, then ABC will get traffic (people that were interested in working out, but John can't handle us or doesn't care about us)

Very deep and interesting analysis.

I love taking things apart and putting back together. or, sometimes, just seeing where they'll break

 

[flowyak]

You said that Johnny's gym is 90% of a copycat of ABC gym, but from the difference seems huge to me.

The original courses and bigger sizes are important, but what sets him apart is the ability to build a community and keep people engaged.

It's an aspect that I couldn't care less (I have been training in my home gym for close to 10 years). For most people, however, it's THE factor for choosing a gym. They are looking to build friendship, finding a partner that keeps them accountable and help them stick to training.

Business ABC has been in the game for 13 years and they haven't understood this fundamental fact. That's a huge failure on their side. For gyms and small retail businesses in general, the only differentiating factors are proximity and the ability to build a personal relationship with customers.

Talking about gyms, you could say that there are many different kids and that alone can be a form of differentiation. I personally don't agree. The different types of gyms are made to attract different kinds of people which is a way for a customer to decide what kind of people he wants to engage with.

It's easy to copy the form, close to impossible to copy the latter. And if you aren't able to build relationship, it's just a matter of time until you fail.

There is famous fictional dialogue that does along the line of:

"What if I train my employees and they leave?"

"What if you don't and they stay?".

As a business owner you are always training potential competitors, for this reason you need to have a true competitive advantage. The problem with ABC is not that Johnny built a competitor, but that (at least from what I get here) they have no competitive advantage.

 

[Xeon]

You said that Johnny's gym is 90% of a copycat of ABC gym, but from the difference seems huge to me.

The original courses and bigger sizes are important, but what sets him apart is the ability to build a community and keep people engaged.

It's an aspect that I couldn't care less (I have been training in my home gym for close to 10 years). For most people, however, it's THE factor for choosing a gym. They are looking to build friendship, finding a partner that keeps them accountable and help them stick to training.

Business ABC has been in the game for 13 years and they haven't understood this fundamental fact. That's a huge failure on their side. For gyms and small retail businesses in general, the only differentiating factors are proximity and the ability to build a personal relationship with customers.

Talking about gyms, you could say that there are many different kids and that alone can be a form of differentiation. I personally don't agree. The different types of gyms are made to attract different kinds of people which is a way for a customer to decide what kind of people he wants to engage with.

It's easy to copy the form, close to impossible to copy the latter. And if you aren't able to build relationship, it's just a matter of time until you fail.

There is famous fictional dialogue that does along the line of:

"What if I train my employees and they leave?"

"What if you don't and they stay?".

As a business owner you are always training potential competitors, for this reason you need to have a true competitive advantage. The problem with ABC is not that Johnny built a competitor, but that (at least from what I get here) they have no competitive advantage.

Well said. The more I analyse John's gym, the more I feel that it's literally ABC Gym on steroids and without all of its flaws.

The community bonding part never used to be an issue until I saw what John's gym was doing. In fact, when I look at photos of John's gym, there's a sort of a lounge hangout area where members can sit around, talk, loiter and chat before and after the class, something which ABC Gym didn't have much of. They have a bench outside the gym, but nothing compared to the kind of setup John has.

Also, one other thing : ABC Gym's boss is not around in the gym most of the time. He's there only on certain days of the year. In contrast, John is the spoke of the wheel, the "facilitator" of conversations between newcomers and regulars......I think this is very well executed. The members at ABC Gym are more of "hi bye friends". I remember when I first joined ABC Gym years ago, I got a "cold" and "unwelcomed" sort of vibe (mind you, this is considered a premium gym).

Another issue which I'm not sure if I mentioned in earlier posts above is, ABC Gym has no loyalty programs for long time customers. You can be there for 3, 6, 10 years and your membership renewal fees are just the same as new members. Heck, new members actually got better deals when they join lol. The focus seems to be on acquiring new customers and not keeping the existing ones....no wonder most people come and go......

Unless John's Gym rental fees does John in, otherwise I think ABC Gym is F*cked.

 

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[James Klymus]

Business is competition. The business owner of the first gym had the very same opportunity to be friendly and build a relationship with his clients. He didn't, so someone acted on an opportunity and "stole" his customers.

The problem I see with this is, People who don't understand the free market, who get upset when their customers go to another business because its better. If they then turn to litigation and/or contracts such as noncompete agreements, I see this largely as tampering with a free market.

I work for a restaurant that had me sign a noncompete agreement when I got hired. I wasn't allowed to open a similar restaurant or even go work for a competitor at any point in the future. Since then, I believe a judge had ordered the company to do away with the agreement.

I can see both sides of the coin though. As an entrepreneur, If I see an opportunity that the company I work for is missing out on, Why shouldn't I be able to take it?

On the other hand, It took a lot of time, effort, manpower, and millions of dollars to develop the systems they have in place, if theyre a big chain. Why should some joe off the street come in and arbitrage that WHILE getting paid to learn the information that took years and millions of dollars to develop?

 

[Ing]

I assume, John had analyzed ABC for a long time and recogniced possibilities.
Maybe he made suggestions to the ABC owner and he didn’t want to listen.

Without further info its hard to morally talk about it.

Maybe Singapoure is big enough to send enou ppl to both of them.

 

[Hadrian]

Setting up in another part of town sure but not right in his face.

Or in other words if I was dating a girl and it turned out I had a greater attraction to her friend, if I broke up with her and later ended up dating her friend I certainly wouldn't rub my ex's nose in it...

Karma tends to be quite a bitch...

 

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[Odysseus M Jones]

Maybe Singapoure is big enough to send enou ppl to both of them.

In Singapore & most of Asia, shops & businesses are clustered by type.

On Orchard road there was Lucky Plaza, all gadget shops.
Same in HK, all the hardware stores in one area, streets of just hardware stores nothing else.
Chinese herbal medicine, same.
Dried food, stationery, tailors, fabrics.

It's easy for consumers & good for business.

No one cries when a million bars & clubs open in the same building.
So why not gyms?

But the others aren't membership you say.

Why must we be members?
Why can't we work out anywhere we like & pay per session?
Can gyms only survive on recurring payments from people that don't go?

Or in other words if I was dating a girl and it turned out I had a greater attraction to her friend, if I broke up with her and later ended up dating her friend I certainly wouldn't rub my ex's nose in it...

Karma tends to be quite a bitch...

That's morals not ethics.

And hope that her friend doesn't rub your nose in it when later she dates your friend.

It's a very slippery slope when you meet future dates through your current date.

One day you visit dad & he introduces you to your new stepmother.

You're literally a motherf...

 

[Hadrian]

That's morals not ethics.

I consider them linked!

 

[Odysseus M Jones]

I consider them linked!

Like the people you date?
But that's a topic you can discuss with Mon_Fi for your collaborative Tinder dating app.

 

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[biophase]

I don’t see anything wrong with it. In the USA there are clauses in leases that say you won’t rent the space next door to a similar business. Maybe they don’t have that in Singapore.

ABC gym can always lower their membership prices to keep customers AND also take away current JOHN gym customers if they are price sensitive. I guess we will see if John is in over his head by going so big.

 

[GIlman]

If I ever have to ask myself if something is ethical or crooked, that alone tells me I shouldn’t do it. Life is short, I have no desire to carry guilt or baggage. I have not always followed this myself, and I have always ended up regretting the decision not to trust my moral compass.

 

[WJK]

I came across this incident in my life, and am curious to know what others here think.
Here's the scenario:

1) John goes to work at ABC gym, located at the ground floor, as a fitness trainer.

2) He works there for multiple years, gradually getting to know the regulars at the gym, has them on his FB and whatsapp.
In addition, he also learns about the running of a gym, the operations, the ins-and-outs of everything.

3) 4 years later, he opens his own gym, located just above ABC gym.
The setup of the gym, the gym packages, the website information layout and categories, the gym schedule and training classes etc., is 90% identical to ABC gym.
On the opening day, some of the gym regulars John knew from ABC gym went to his gym, to support him.

Is this considered a normal thing in business? Is this ethical?

I've been asking myself this; my gut feeling tells me something just feels wrong with the way this is executed, especially the fact that John's new gym is located just above ABC gym.
It's not entirely "black", but kinda "gray".

What do folks here think?

* Note: I'm currently a regular of ABC gym.

If the new gym survives, one gym will buy out the other one... or they'll decide to work together... or they'll find a way to co-exist... or... Yes, this type of situation sucks. When someone does it to you, it feels terrible. The owner of your new gym seems to be thumbing his nose at his old boss. OK. But, why would he put that much money and resources on the line just to make a point? There's more to this story than meets the eye. Who is funding the new guy? Who owns the building and why would they allow another gym so close to their long term tenant? Either the owner of the old gym is in on this, or someone with money has it out for him.

 

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[advantagecp]

Sounds like business competition to me. Improvise, adapt, overcome. If you can't handle competition then maybe business is not for you.

 

[Johnny boy]

That’s business. Nothing wrong with it. Just don’t expect the first gym to like you very much.

 

[MarkLavagne]

Absolutely ethical.

If John managed to open his fitness club and vast majority of customers switched to his new venture - in market terms this means value of ABC gym (less John) is negligent, while value of John is substantial. Hence market follows value, not empty brand.

You can't stop people to learn and it's one of key forces moving business around. They will learn and will open new venues and possibly succeed more than original business, provided they have more value than original one.

As an owner of ABC, I'd say key thing is understanding who has the value and compensate (in a very wide sense) accordingly. Compensate John enough so he keeps working for ABC. Opening own gym or whatever business takes enormous hassle with operational framework, clients, etc and one needs to be seriously unhappy about current course of things in order to pull the plug.

 

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[peterb0yd]

This sounds a lot like the plot of the movie DodgeBall lol

 

[LordGanon]

This sounds a lot like the plot of the movie DodgeBall lol

I'd love to train at "Average Joe's"!

To answer the question: If he was friends with the owner of the former gym, he's a shitty friend.

From a business point of view: It's a bad business idea, but it's a free market, isn't it?

 

[Ing]

A similar example:
A sports friend of me has a side business. He lets build accessuars for a sports utility in his village and sells them to all Europe.
He earns a good money though he does nearly make no advertisement for it.

Than I saw, that he didnt occupy the .com domain for his brand. I took it and planned to market that in USA, which is a big market for this item.

BUT first I talked to him about the dangers of not taking the .com domain. He didnt think about the business any further, though it is a great productocracy in my eyes.

Than I gave the domain to him, as for me the friendship is more important .

What I want to say : I could take over his business and he couldn t do much about it.

 

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[Lyinx]

A similar example:
A sports friend of me has a side business. He lets build accessuars for a sports utility in his village and sells them to all Europe.
He earns a good money though he does nearly make no advertisement for it.

Than I saw, that he didnt occupy the .com domain for his brand. I took it and planned to market that in USA, which is a big market for this item.

BUT first I talked to him about the dangers of not taking the .com domain. He didnt think about the business any further, though it is a great productocracy in my eyes.

Than I gave the domain to him, as for me the friendship is more important .

What I want to say : I could take over his business and he couldn t do much about it.

Love it!