19 October 2016 From the Oct/Nov 2016 issue

Betting big on boutique fitness studios

Meet the UK startups attempting to build a blockbuster fitness business out of London. Is there substance behind the lifestyle fluff?

Some 15 months after opening his first site in Holland Park, Core Collective founder Jason de Savary was sweating over securing leases on his next two sites. One was somewhere in the West End, the other in an affluent north London neighbourhood.

As Courier went to press, he was waiting to have the contracts sorted so he could call in the architects and builders, recruit trainers to lead classes and fit out the new spaces with state-of-the-art spinning bikes, chilled fluffy towels and kitchens that resemble fashionable healthy restaurants. He’s earmarked £1m for the fit-out of each new site.

Outside Chelsea

About seven years ago, this kind of pay-as-you-go fitness studio running high-end classes began appearing in the more salubrious bits of west London, projecting an alluring glow that radiated a mix of health, fitness and something a bit fashionable. They were generally dismissed as little more than a rich person’s hobby project. In recent years, however, such businesses have been spotted a long way from Holland Park, Chelsea and Notting Hill. They’re now being taken a lot more seriously, seen as challengers to established gyms and increasingly recognised as having the potential to grow into heavyweight outfits.

Frame, 1Rebel, Skinny Bitch Collective, Another Space, Core Collective, Bootcamp Pilates, Triyoga and Psycle are the most notable in a recent wave of boutique fitness brands. They’re all being eagerly watched to determine how big the impact of this new style of gym can be.

The pool of startups also includes Barry’s Bootcamp, a US business that arrived in the UK in 2013, launching two sites on the back of remarkable revenue growth and a fashionable clientele in America. They join the 20 or so ambitious fitness startups in London that didn’t exist even two years ago and are now seeking to snatch a chunk of the £5bn currently spent in the UK on gym memberships. Many of them target the vast majority of the population with either lapsed memberships or who have never set foot in a traditional gym; just 17 per cent of us are currently a member of a gym or fitness studio.


SoulCycle sensation

Although all very different, this band of class-based operators share some common beliefs and values that go against the common orthodoxies of traditional gym operators.

Almost all have taken inspiration (to varying degrees) from the fitness-meets-lifestyle formula that has underpinned the unstoppable rise of SoulCycle in America.

SoulCycle has been both cultural sensation and big financial story in New York and across America. It has opened over 65 of its darkened spinning studios since launching 10 years ago, with people desperately signing up to waiting lists for its £26 classes. It posted £90m in sales in 2014, growing at a rapid clip, leading to it filing for a float last year, which is still pending. The announcement sent investors and media a bit giddy with talk if opening a further 250 sites and promising all sorts of sexy-sounding digital expansion strategies in the coming years.

It’s led many to ask whether any of the new boutique fitness brands in London can ‘do a SoulCycle’?


Change in attitudes

Investors and founders are certainly trying. There’s the belief that America generally, and New York in particular, is about five or even 10 years ahead of London when it comes to fitness, so the chance to ‘get ahead of the curve’ and attempt to replicate the SoulCycle miracle has been compelling.

Compounding the excitement is the multitude of reports on young people and their attitudes towards health and fitness. Eating healthy food, taking part in group fitness activity and choosing where to live based on whether young people can walk or cycle to work is now mainstream and seen as a marked shift from previous generations. An American report claimed 27 per cent of 21 to 30-year-olds belong to a gym, but almost all feel frustrated by them, believing their gym to be too expensive and unsuited to their needs.

It’s a phenomenon that’s noticeable among young Londoners, too; the big box gym isn’t connecting with this audience. Instead, a new style of fitness can be seen on university campuses, Instagram feeds and across the city after work. Classes with signature workouts and instructors who often have their own fanbase seem much more enticing than a brightly lit room full of weights and machines. The business strategy is distinct, too. Under this new approach, often working on a pay-as-you-go basis, the fitness business only works by ensuring people use the facilities as much as possible and get the results they’re after, in contrast to the traditional model of ‘managing churn’ – trying to make sure more people sign up than those leaving after their 12-month gym contracts have elapsed.

1Rebel’s crowd raise

These big generational trends of behaviour and attitude of big influential swathes of young people living in the cities are the kind of underlying ‘macros’ that investors typically gravitate towards. And funds have certainly been flowing through venture capital, wealthy individuals and even crowdfunding. It also helps that potential investors are often exactly the same consumers that boutique gyms target. Many city workers were amongst those who helped 1Rebel raise £1.5m on Crowdcube in summer 2014, and another £3m on the same platform in December last year, in exchange for 23 per cent of equity.

‘We’re seeing a more positive sentiment to fitness rather than just dieting and cutting things out,’ says Yasha Estraikh from private equity firm Piper. He adds: ‘People don’t have a lot of time and want to mix fitness with their social lives and a lot of the new boutique brands are driving that.’

Is it a fad?

While this new breed of studios are certainly delivering something fun, positive and social, they’re split on how narrow to focus. Psycle doesn’t stray from spinning classes, while 1Rebel has just three types of classes (‘Ride’, ‘Reshape’ and ‘Rumble’). Gymbox and Frame offer a multitude of classes with quirky names, from Frame Rave to Drill Sergeant.

Such classes – as well as gimmicks like 1Rebel’s Bellini and blow-dry bar – have attracted interest but they add to criticisms that boutique fitness is little more than a fad. One thing all of the new boutique fitness operators say though is that there are too many of them, expressing a blunt belief that most won’t be around in five – let alone 10 – years’ time.

A test many are applying to try to forecast which ones will endure is to assess which are most likely to work outside the City and a few wealthy London postcodes.

Founders of London’s boutique studios are confident their particular concept can be stamped out across their home city and beyond. Many are already making plans for Manchester, arguing that fitness is a concern beyond the very affluent in the capital. They all claim their model is flexible, as class prices can be reduced in line with the cost of leasing space in different parts of the country.


Manhattan density

There’s also the small matter of catchment and density. Gyms and studios typically rely on the willingness of most people to make a five-minute detour between their workplace and home. It’s why comparisons with New York are problematic. Vertiginous New York has a population density that only the Square Mile and Canary Wharf can compete with in London.

It also brings to the fore the search for space. Something New York and London do share is a market for square footage that’s akin to the trade in uncut diamonds. Large spaces in premium locations are needed for classes, showers and changing facilities making the business of securing spaces for fitness studios intensely fought over. On the plus side, though, fitness studios can work in basements and often in oddly-shaped lots that a landlord can’t shift to a resident or retail tenant.

Many landlords have also come to value the presence of a swanky gym in a large development. It was, in fact, landlords who actively lured Barry’s Bootcamp to its site in Moorgate, Frame to King’s Cross and Psycle to Canary Wharf with cut price deals. In Los Angeles’ Eastown, a developer has given side-by-side units to SoulCycle, Barry’s and a healthy food shop under the belief that their mere presence represents the most effective and most lucrative route to renting out residential units.


Untapped opportunity

Aside from finding locations, a scaling problem persists  for anyone with aspirations to build a fitness business with multiple locations. As well as uncertainty as to whether each format chimes with people in different neighbourhoods, building a chain of upmarket fitness studios is a long, cash-draining and painful process. Especially as every new location has to offer the same quality workout as the original studio.

It’s why some are turning to a franchise model. Bootcamp Pilates, a studio that’s been running for a decade, has sold franchise licences in Fulham and Windsor. It charges a one-off £15,000 fee and then takes a 10 per cent cut of all the income. Hot Pod Yoga has a similar structure, selling its heated pods for £10,000 to a franchisee and taking a further 20 per cent of future revenue.

Several companies are adding to the cult of their classes with more revenue boosting lines: clothing, food and cafes. Frame was poised to launch its own clothing range at the time of publishing. Bodyism has inverted the model, using a small number of small gyms serving a limited client base with an over-subscribed waiting list in locations such as Notting Hill and Capri; but those studios are little more than window-dressing to its real business of selling supplements, books and drinks.

These moves by the likes of Frame, Bodyism and many others are why so many believe there is growth to be had in boutique fitness. For them, this is a vehicle in a generational shift towards health, and where more people will want to spend their money in the years ahead.

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