We watch the franchise industry, our radar is always on, and we see new ideas as they surface.
Some of those ideas get off to a good start but will take years to mature and develop. Some will fizzle out before you know it. But, every now and then one looks like it has all the right pieces in place to capture the brass ring early out of the gate.
Which category does Premium Indoor Cycling fit into?
Let’s begin with the sandbox they play in: the indoor cycling space traces its roots back to the cycle classes you would find in your local big box gyms beginning in the late 1980s. In large measure, these classes were lumped in with a number of other amenities offered by those big gyms to entice new members to sign up. Over time training and certification programs brought over 200,000 cycle instructors into those gyms.
As we have seen happen with personal trainers, Pilates and yoga instructors, some of those gym-based trainers eventually set out to open a small owner-operated studio. In time we see a few of those ‘mom and pop’ operators wanting to become pioneers and build bigger more successful businesses. In the cycling space this seemed to pick up pace in the early 2000s where the founders of the brands, both independent and franchised, set out to stake a claim in the Premium Indoor Cycling category that you might find popping up in your community today.
In those early days it was a quest to figure out what consumers would pay a premium for, often in addition to their regular gym memberships. What they learned was that it was about the experience from start to finish; almost more of an entertainment business where you get the side benefit of burning a huge amount of calories during your visit.
Clients in these businesses tend to buy packages instead of memberships and this means the need for a membership salesperson goes away. Those packages may be purchased online, which can simplify the accounting process within the operation as well as what owners need their counter staff to do. The trainers could be brought in as contractors, and this would simplify payroll and management. The key here would be to get top talent and make sure they can be that big personality at the front of the room. Potential trainers may currently reside in most markets given the number of certifications that have been awarded over the years. The best
trainers among them would be candidates to lead these classes and provide the right experience. The biggest brand in the space over time may be most likely to control the largest pool of this top talent.
With a manager sourced from the fitness or hospitality industries, this could be run as a semi-absentee business – one with low payroll and overhead. The start-up cost should be pretty reasonable given the fit-out and equipment leasing options as well as the “bring a friend” nature of many fitness operations. From a portfolio building point of view, the semi-absentee role, low start-up and low overheads are likely to make this category very attractive to those who see themselves, now or in the future, as multi-unit franchise owners. With upwards of 40-60 cycle seats to fill in every class and one instructor leading them, the unit economics in this category are pretty compelling, even at partial capacity.
There are some key areas to confirm capability in:
• Do they have expertise in setting up indoor cycling businesses: running them, building a class curriculum and filling all those cycle seats?
•Do they have experience with franchise systems: building them, running them, growing them?
• How will they handle site selection and growing as fast as may be required to be dominant in the space? Can they get top sites and negotiate good leases?
• Do they have the architectural and construction teams to get their franchises open fast?
Being first to market here may not be critical as the first couple of brands to get some notoriety, SoulCycle and Flywheel, are independently owned and not franchising. While they are getting press and moving at a good company-owned location pace, their growth rate could still be considered modest by some standards. Being the first 800 pound gorilla to market will be the true test. That first player to capture true market dominance and control over the potential market (not just most units today) would attract the best talent, get the best real estate and leases as well as potentially become that household brand on the tip of everyone’s tongue.
How would they do that?
• They would seek a very fast expansion by partnering with very qualified candidates (money and skill) – that market leader may turn down more candidates than they offer franchises to. We help our candidates pursue franchise approval every day and it always makes us nervous if a franchise company accepts everyone.
• They would be hard pressed to offer those big mega unit franchise deals. It just takes a long time to roll them out and in a fast moving space like this they need the brand on the street everywhere and fast. They may have a couple of big sales, but most would be 1-10 unit deals with the opportunity to add more (depending on territory availability) down the road.
• They would roll substantial resources into growing their infrastructure as fast as possible with the goal of being ahead of the growth curve.
Back to the question we started with, is Premium Indoor Cycling the “Next Big Thing”? Well, my crystal ball is in the shop for routine service, but this space is lighting it up in terms of press, sales, growth and consumer adoption. The numbers are compelling and it fits the role of a portfolio addition.
What I can say is that my wife, who has never wanted to own her own business before, told me to buy her a few of these. I’ll take that as a sign there is something worth investigating here!
Mr. Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both startup and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.
Contact the Franchising USA Expert George’s Hotline 703-424-2980 www.FranGuide.com