Few sectors across the fitness landscape have been hit harder by the pandemic than boutique studios. Overnight income dried up, costs escalated and yet Government support missed the mark.
But amid this brutal backdrop, United Fitness Brands emerged at the start of 2021 with a bold ambition to strengthen and consolidate a divided market.
Comprising established boutique brands Boom Cycle, KOBOX and Barrecore, London-based UFB has pooled its combined 25+ years of experience to form a fitness supergroup able to ride out the challenges of COVID-19.
This week the company unveiled its latest launch, with Barrecore set to open a 2,700 sq ft site in the City at 50 St Mary Axe next month, its 14th UK site and 10th in the capital.
Now its three founders, Joe Cohen, Robert Rowland and Hillary Rowland, have international expansion in their sights and are already eyeing a fourth brand acquisition.
Here, the founders highlight the greatest threats to the boutique fitness sector in the UK, outline their ambitious plans for overseas growth, and explain why joining forces is good for business and good for consumers…..
On banking on bricks and mortar…..
Joe Cohen: We’re really excited that we’ve signed a new location in the City in St Mary Axe. We have builders on site as we speak and we’re hoping for it to open in November. It will be the latest studio to open since we moved Barrecore from Chelsea’s King’s Road to the same site as KOBOX in Waterloo. There we have a KOBOX studio on the ground floor and two beautiful Barrecore studios on the first floor.
Robert Rowland: Despite the past few months of the pandemic, we are pressing forward. There are good deals to be done. We always knew the short term was going to be bumpy but we fully believe in the long-term success of bricks and mortar studios. Digital is here to stay and will remain a useful tool, but we fully believe in the demand for physical studios and that people will want to be part of that in-person community on a day-to-day basis.
On the role of digital…..
RR: When you talk about digital there are two sides of the coin. We will be looking to move our online classes onto one online platform that will be a great hub for all our brands. Then we’re also developing a digital solution behind the scenes. We’re investing heavily to build a backend system where we can use data to help make our businesses more efficient, to help them grow and improve the customer experience.
Rather than building our own booking system, like Mindbody, it will be a platform that sits on top of that and takes the data from all parts of the business, helping drive business decisions. It will be amazing to be able to use data to look at where we open locations, how we run classes more efficiently, how we make pricing more efficient, and really utilise 21st-century tools. We hope it will be a big pull for future brands coming on board and that’s going to be a big focus for us over the next two years.
On strength in numbers…..
RR: We’ve not reinvented the wheel here. Our model is a tried-and-tested method across many industries. The Restaurant Group is an example. Yum! Brands is an example. Fundamentally, UFB as a company takes care of the boring admin. We do finance, a bit of marketing, PR, operations and so on.
Rather than each of the three brands having a financial controller, we now have one. Instead of three marketing directors, we have one. Head office costs are half what they would be if we had individual staffing costs. That’s before you even look at economies of scale for purchasing and rental costs to landlords.
Hilary Rowland: On top of that, the advantages are space and collective experience. For example, situating Barrecore above KOBOX on the King’s Road has saved a huge amount of rent. Sharing our collective years of experience, rather than competing against each other, is also a huge resource. Combined, our brands have over 25 years of experience and shared networks.
On disrupting the boutique studio model…..
RR: Aspects of the old model weren’t working for a lot of brands. We saw very early on that people overspent on fit-outs, for example. Could you still make a successful independent boutique studio chain now? You could, but the point at which you get to scalability and profitability with all the head office costs just takes a lot to get there.
Ultimately, it depends on what your goals are. You can build one or two sites and have a profitable business. But if you want to grow a big chain across the UK it takes an enormous amount of resources. In a nutshell, what we’ve done with forming UFB is going to make it harder for others to grow.
On the legacy of the pandemic…..
JC: I think we’ve all become a lot cleverer with how we run our studios. We used to have two front of house and two cleaners. We’ve cut that in half and become a lot cleverer with costs. We were all on this big running track and were just running. We didn’t take enough notice of what was happening within our businesses.
The pandemic made us stop and think what can we do better and how can we be more efficient? By setting up UFB, the amount of money we’ve saved on head office costs alone is a testament to what the boutique fitness market should be looking at. It’s all about saving costs.
On threats to boutique studios…..
JC: The greatest challenge for boutique studios right now is just staying alive. It’s been a really difficult 18 months for everybody in the market. The boutique fitness model is very simple. It’s pay-as-you-go. When you close you have no more money coming in. That’s it. For a lot of us, it is all about survival and waiting for people to get over Covid in their own heads so they feel comfortable coming back to the gym.
People forget that gyms are some of the cleanest spaces you can visit. We spend a lot of money on our air circulation and cleanliness and it’s just about getting that message to people. The other big issue is people coming back into the West End and back into London. There were days when it felt totally back to normal. There are others where you ask where is everyone? There is no rhyme or reason right now.
RR: For a lot of small independents it’s going to be tough when the rent moratorium ends in March next year. Restaurants, bars, even McDonald’s, all had a VAT cut yet this sector didn’t. A lot of people in this sector are self-employed so they didn’t benefit from furlough. The cut to business rates was a big help but there were very few sector-specific initiatives to help us.
There have been calls for a scheme such as Work Out To Help Out but that hasn’t materialised. There has been no VAT relief. It’s a bit strange to understand why given we’re living through a health pandemic. So we’ll see. It’s going to be tough for some brands.
On future opportunities…..
HR: Eventually we plan to have super sites under the UFB umbrella that will house more than one and possibly all of our brands.
RR: Over the years we have been approached by various department stores to take over floors. There are plans for some brands to open food hall versions for fitness. That solves a lot of problems and breaks down barriers to entry in terms of fit-out costs. So do I think we’ll see department stores of fitness brands? I do. Where and when? I don’t know.
JC: The biggest issues are the rent and the rates. Rents are huge. We still don’t have the footfall that we had before, even on Oxford Street. It’s still not back to normal. Tourists aren’t here right now and we don’t know how long that will take to pick up.
Big companies and department stores are always approaching us to see if we’d like to partner with them. But at the end of the day it’s all about location and density of people. Are there enough people around that are willing to pay to go to a boutique fitness class, as opposed to going to Pure Gym and paying £20 a month for their membership?
On the influence of David Lloyd as Chairman…..
RR: Boutique studio fitness is a route he’s been pushing for some time. He saw it coming. That’s why you have someone like David around. He saw the market needed this and was ripe for it and he’s been a big supporter of ours. He was Boom Cycle Chairman before we set up UFB so he’s been a big supporter of us for many years.
On big box gyms…..
RR: There are certainly some niche big box gyms that do very well. David Lloyd Clubs is one of them. Gymbox does very well. They’re the middle of the road gyms that seem to do very well. The Fitness Firsts seem to suffer a little bit more. We’ve always said our customers are likely to come to us but also have a low-cost gym such as The Gym Group or Pure Gym as well. They fundamentally find something different from us, in terms of that community and tribal feel, that they just can’t get anywhere else.
On the franchise fitness model…..
RR: We get a lot of comparisons with Xponential Fitness in the US and we’ve been watching their growth carefully. It’s always handy when companies float [on the stock market]and we can get lots of useful nuggets of information from their public filings. They are pretty similar to Young Brands in the restaurant sector who own KFC, Taco Bell and Pizza Hut.
They are predominantly franchise-based, which is an enormous market in the US. That allows for exponential – pun intended – growth. They have something like 1,750 studios at the moment. We are certainly looking to grow the franchise part of our business as well, not just across the UK but also Europe.