# More Trouble Ahead for Martial Arts Schools?

- Link: https://brianejohns.com/2023/09/13/more-trouble-ahead-for-martial-arts-schools/
- Published: 2023-09-13T11:30:00-04:00
- Author: Brian Johns

When we thought martial arts schools could rest easy after the pandemic, we now 
realize that potentially tough times are ahead. Jeebus, what now?

In short, interest rate hikes.

## First, before we discuss interest rate hikes, there are already some troubling signs for consumers in the USA and Canada.

Let’s start with the USA. According to a recent article in the [Economist](https://www.economist.com/graphic-detail/2023/08/21/americas-pandemic-savings-are-running-out):

> Research by Hamza Abdelrahman and Luiz Oliveira of the Federal Reserve Bank of
> San Francisco suggests that Americans have burned through more than 90% of the“
> excess savings” they amassed in 2020 and 2021. What little remains, the economists
> estimate, is likely to be gone by the end of September (2023).

On the plus side, the [American household debt-to-income ratio](https://www.barrons.com/articles/american-household-debt-fed-federal-reserve-51663092589)
reached a record high of 130% on the eve of the 2008 financial crisis. Since then,
it has come down to 92%, still quite high but far better than in 2008.

On the other hand, household debt in Canada is now the highest of any G7 country,
according to data by the country’s housing agency. The amount owed by Canadian households
is also higher than the country’s entire GDP. The Canada Mortgage and Housing Corporation
said high home prices are to blame for the ballooning debt. See [this article](https://www.bbc.com/news/world-us-canada-65688460).

> In an analysis published Tuesday, Canada Mortgage and Housing Corp. deputy chief
> economist Aled ab Iorwerth said that the country’s household debt has been rising“
> inexorably” due to rising home prices.
> Mortgages currently make up about three-quarters of household debt in Canada. 
> While household debt made up 80 per cent of the size of the overall Canadian economy
> during the 2008 recession, it rose to 95 per cent in 2010 and exceeded its size
> in 2021, he noted.
>  [CTV News](https://www.ctvnews.ca/business/canada-has-highest-household-debt-level-in-g7-cmhc-deputy-chief-economist-1.6410137)

So, we now have financially stressed consumers in the USA and Canada. It appears
that Americans were badly burned by the Great Financial Crisis of 2008 and have 
worked to bring their debt down to a much more reasonable level than in 2008. On
the other hand, it does not look good here in Canada. A huge factor is the housing
affordability issue.

## Pullback in Consumer Spending

An article in today’s Toronto Star revealed that Canadians are beginning to rein
in discretionary spending. According to the [article](https://www.thestar.com/business/toronto-restaurants-see-double-digit-decline-in-people-dining-in-suggesting-pullback-in-discretionary-spending/article_504337ef-9e3e-54e2-918a-e43a1a2fcb20.html):

> Toronto restaurants have witnessed a year-over-year, double-digit decline in the
> volume of in-person diners, according to new data from OpenTable, which suggests
> consumers are pulling back on discretionary spending amid [the rising cost of living](https://www.thestar.com/business/personal-finance/rate-hikes-food-inflation-mortgage-costs-how-to-get-through-the-cost-of-living-crisis/article_186af7f7-7a39-57d5-8b1b-deae5c973466.html).

Furthermore,

> The new data also aligns with other reports, which suggest [consumer spending has plunged as Ontarians start to feel the pinch from rising interest rates](https://www.thestar.com/business/cracks-beginning-to-show-consumer-spending-plunges-in-ontario-as-interest-rate-hikes-start-to/article_63b04741-368a-52f9-ab7a-38be1526cf4b.html).
> A report released last month by the Canadian Chamber of Commerce showed that Ontario
> led the country with the biggest drop in consumer spending at 8.5 per cent month-
> over-month in July compared to a 3.6 per cent drop nationally.
>  [Toronto Star](https://www.thestar.com/business/toronto-restaurants-see-double-digit-decline-in-people-dining-in-suggesting-pullback-in-discretionary-spending/article_504337ef-9e3e-54e2-918a-e43a1a2fcb20.html)

How will this pullback in consumer spending affect martial arts schools? I’m speculating
here, but I don’t think it takes a rocket scientist to know this is not a promising
business environment for martial arts schools.

A martial arts school needing 100 students to break even is in trouble if the numbers
drop to 95. The most troubling aspect is that most martial arts schools don’t have
cash reserves or savings to float them through tough times.

Again, the housing market is squeezing many Canadians. Combine out-of-control prices
with rising mortgage rates, and trouble is on the horizon. The drop in consumer 
spending is bound to affect many businesses, including martial arts schools.

## Unfortunately, another factor may make life hell for martial arts school owners. I speak of rising rents.

Many martial arts schools lease their space from commercial landlords. Landlords,
in turn, have mortgages to pay. You can see where I’m going with this. As interest
rates rise, the mortgages will become more onerous. The rising mortgage costs are
passed down to the tenants (martial arts dojos) and their customers. At least, that’s
what may happen.

## A pullback in discretionary spending and increased rents may stress some or many martial arts studios to the breaking point.

Which ones? I would put my money on schools with smart, creative owners. One may
say that MMA schools may be more likely to survive than traditional dojos. That 
may be true. But, it’s the quality of the school that will determine whether it 
survives or not. This will likely be a slow-motion wreck as high-interest rates 
work through the financial plumbing.

We shall see.

## On a personal note, I resumed my twice-weekly self-defence class at Durham College/Ontario Tech University this week.

![](https://i0.wp.com/brianejohns.com/wp-content/uploads/2023/09/IMG_3462.jpeg?resize
=480%2C640&ssl=1)

**Waiting for students to arrive!**

My classes for the spring semester had to be cancelled due to my hip replacement
surgery in January. I missed teaching them, and it’s great to be back teaching self-
defence skills to young students. One thing I can’t get over is that I’m _older_
than some of their parents. What the fork?! LOL.

My private lessons are slowly picking back up. While I have experienced some fatigue
in the operated hip, it hasn’t been all that bad. It’s getting stronger.

In addition, I started teaching a weekly class at the [A.B.S. Training Centre](https://abscrew.com/#home)
in Pickering. A great place with a phenomenal atmosphere!

> View this post on Instagram
> [A post shared by Brian Johns, Instructor (@brianejohns)](https://www.instagram.com/reel/Cw6ZwBduz-4/?utm_source=ig_embed&utm_campaign=loading)

**I got a phenomenal response to this video. Four folks inquired about classes. 
Let’s see what happens!**

In sum, things are slowly but surely picking up as we move into the fall. Stay tuned
for more!’

## Additional Reading

 * [The Equivalent of a Ph.D?](https://brianejohns.com/2016/05/12/blog-the-equivalent-of-a-ph-d/)
 * [Macro Awareness for Self Protection](https://brianejohns.com/2022/07/27/blog-macro-awareness/)
 * [Workshop at Canada Bakbakan Headquarters](https://brianejohns.com/2011/02/11/blog-workshop-at-canada-bakbakan-headquarters/)
 * [The Coming Winter](https://brianejohns.com/2021/11/01/blog-the-coming-winter/)
 * [Unveiling the Statistics: Violent Crime in Durham Region](https://brianejohns.com/2024/03/28/an-uptick-of-violent-crime/)

## **Lastly,** **buy me a coffee or a beer!**

**On a serious note**, **please consider supporting this blog because I need your
help defraying the increasing expenses associated with the blog/website. **

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