Julian Barnes and Adam Sedlack share the importance of studying studio success and what big box gyms can learn.
According to RunRepeat, more than 42% of all gym memberships are to boutique fitness studios, making up nearly half of the $102 billion revenue from the gym industry in 2021. There are a plethora of lessons big box gyms can learn from studios.
However, like big box gyms, boutique studios are still recovering from the impacts of COVID-19.
Boutique Fitness Solutions found in its Fall 2022 Studio Owner Survey that 43% of studios are profitable — year to date — and 23% of studios break even. While profitability is yet at 50%, Julian Barnes, the co-founder and CEO of Boutique Fitness Solutions, said the survey results are encouraging.
“Keep in mind, we’re talking about the 70% of studios that survived the pandemic, because of course, IHRSA said we lost 30%,” explained Barnes. “So, of those 70% of survivors, two-thirds are at least break even. I think that’s quite significant and why we believe the industry is recovering, but not yet there.”
So, what is driving the profitability of these studios? According to Barnes, that varies location to location.
“We thought there might be some common characteristics among profitable studios and those that have recovered quickly or quicker, but the reality is it’s ultimately determined by each business’s unique criteria,” said Barnes.
A common driver impacting boutiques’ profitability is the building lease.
According to Barnes, before you even open lease negotiations will largely determine how much revenue you need to generate to become profitable. “I’m based in New York City, and we have two members in New York City that are located three blocks from each other,” he said. “One of these businesses — and they’re both personal training gyms — pays $14,000 a month in rent, and another business pays $27,000 a month in rent, and they’re three blocks apart.”
Clearly companies paying less rent have an easier path to profitability. However, you also must take into consideration payroll.
Many of the studios that have returned to profitability have drastically reduced their payroll and overhead during the pandemic. According to Barnes, some cases of success were where the owners returned to the classroom for the first time in a while or picked up more teaching shifts, sometimes by choice and oftentimes not by choice.
Adam Sedlack, the CEO of UFC GYM, agreed the importance of the owner and team members makes material difference in boutique success rates.
“Generally, most boutiques need to establish over 75% occupancy on class attendance to drive positive cashflow,” said Sedlack. “In my opinion, the most successful gyms are made up of owners who have figured out the secret sauce of hiring right, marketing investment and a friction-free operating system. At UFC GYM we have three models, including our own boutique with CLASS by UFC GYM. The challenge we will all face circulates around talent. Great people create great results.”
While boutiques are still recovering, nevertheless there are lessons big-box operators can learn from them. For Barnes, a huge lesson is increasing visits.
According to Barnes, Dr. Paul Bedford of The Retention Guru said the No. 1 driver of retention is visits. When a member visits less than four times a month, they are a high risk of canceling their membership.
“The studio model wants to drive retention rates or drive visits; they want you to come as much as possible,” said Barnes. “Historically — and I’m going to make a generalization here — historically, the big box model included a line item where they were making money off people who weren’t using memberships. They were happy to profit from people who weren’t coming. And I say historically because that is probably in the process of changing.”
Another lesson big box gyms can learn from boutiques is the importance of providing training guidance to their members.
“Take the average person who’s not trained in fitness,” said Barnes. “They join a big box and walk into the gym with all this equipment and fit people running around. And if you don’t know what you’re doing, you’re not going to get the results you should get. After a couple of months of not seeing the results you hoped for, you’re going to become discouraged and leave. So, in my opinion, big box gyms need to think about how to provide more guidance.”
Sedlack has learned first-hand from his boutique offerings. Specifically, he’s seen the importance of getting a boutique experience value proposition.
“When larger gyms can create the same connection between classes, instructors and members, success can be achieved,” said Sedlack. “The boutique business drove our industry to become better at technology, buildouts, hiring, AV, lighting and more. At a 40,000-square-foot UFC GYM we have focused on these fundamentals, and we are excited about our core class and member experience. The variable comes down to how you select your people and the ceiling of expectation around the class experience.”
Overall, in 2023 there are more options in fitness than ever before, and a lot of gyms can continue to learn from boutiques. What excites Sedlack the most is that from boutiques to big box gyms they are extending lives and improving mental health.
“Subjectivity will always be present, and as we enter the post-COVID era it’s truly through the eyes of the consumer that will force continued innovation and industry enhancements,” said Sedlack. “There are so many great leaders in our industry and as a collective we can change the narrative of making fitness essential. There is enough room for boutiques, mid-sized facilities and large gyms. Know what you stand for, hire right, pick good real estate and have a great marketing plan. Success will find you.”