STUDIO SUCCESS Abbreviated (PDF)

Contents
Acknowledgement..............................................................................................................................................................3
Contributors..........................................................................................................................................................................4
Preface..................................................................................................................................................................................7

Section I From Vision to Reality......................................................................................................9
Chapter 1 The Fitness Studio Market................................................................................................................................10
Chapter 2 Creating a Unique and Compelling Brand Promise for Your Studio..........................................................19
Chapter 3 Establishing a Legal Business Entity for your Studio......................................................................................27
Chapter 4 Building a Business Plan and Proforma to Attract Investors and Drive Profitability..................................32
Chapter 5 Raising the Money to Support your Vision....................................................................................................44
Chapter 6 Designing and Developing your Studio........................................................................................................51
Chapter 7 Leasing and Franchising.................................................................................................................................64
Chapter 8 Selecting the Right Revenue Model for Your Studio...................................................................................72

Section II Sustaining the Momentum; Operational Effectiveness.............................................82
Chapter 9 Marketing that Drives Traffic...........................................................................................................................83
Chapter 10 Financial Basics..............................................................................................................................................94
Chapter 11 The People Factor: Building and Empowering the Right Team for Your Business................................110
Chapter 12 Staging Memorable Experiences For Clients and Members .................................................................128
Chapter 13 Risk Management for the Studio Operator..............................................................................................142

Section III Insights from the Trenches........................................................................................152
Chapter 14 Stories of Success.........................................................................................................................................153
Chapter 15 The Transition from Trainer to Owner.........................................................................................................182
About the Author.............................................................................................................................................................188
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Appendices....................................................................................................................................................................189
Appendix A: Compensation Agreement Template.............................................................................................189
Appendix B: Independent Contractor Agreement..............................................................................................191
Appendix C: Behavior Contract.............................................................................................................................194
Appendix D: Physical Activity Readiness Questionnaire......................................................................................196
Appendix E: Physican Release Form......................................................................................................................197
Appendix F: Waiver and Release...........................................................................................................................198
Appendix G: Incident Report Form........................................................................................................................201

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In contrast to IHRSA’s data, research findings reported in 2011 by IBISWorld, the world’s
largest independent publisher of U.S. industry research, indicate that there are an estimated
25,000 Pilates and yoga studios and 56,000 personal training studios in the U.S. While the
numbers presented in these two reports vary considerably, what they highlight by the mere
fact they are being reported, is the emerging significance of this segment to the future of the
health/fitness facility industry.
The growth of the studio segment has gotten to the point where many of the health/fitness
industry’s big box players and prominent operators now see independent studios as their
number one competitive challenge. Therefore, our objectives in this chapter are to provide a
glimpse of what is happening in the market, as well as share a little of the history of the fitness
studio industry, which in turn should provide insights into the opportunities for growth in the future.

Insights and Observations about the Fitness Studio Market Today
As shared in the introduction, statistics on the size and scope of the fitness studio segment
varies considerably. This author’s opinion is that the size of the studio market probably falls
somewhere between the numbers reflected in IHRSA’s report and those presented in the
IBISWorld reports. All one has to do is visit one of the large urban markets such as Chicago,
New York or Los Angeles, or spend a day driving around the suburbs of a major market such as
Atlanta, Dallas or Denver to see the proliferation of fitness studios. All said, what do we know
about this market?
„„ The fitness studio segment has many faces. While the health and fitness industry has evolved
to the point where many clubs look eerily similar (e.g., 24 Hour Fitness, LA Fitness, Gold’s,
New York Sports), the studio market is fragmented and diverse. Studio operators have
been able to accomplish what their larger siblings, the big box players, regional firms and
franchise companies have been unable to do, namely, fulfill the needs of niche and highly
passionate interest groups. Fitness studios have evolved into exercise destinations that serve
specific fitness clans, groups of people who are passionate about pursuing a specific type
of exercise regime. A small sampling of the types of niche studios that have evolved over
the last decade include:
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Personal training studios. Personal training studios vary considerably, often being based on
the training principles espoused by their founders. Among the variations are studios that
utilize standard fitness equipment (e.g., cardio equipment, variable resistance machines
and free weights); those that use more functional based apparatus such as TRX, ropes, tires
and Kettle bells; those who specialize in group and boot camp style training, and even
studios that utilize martial arts type training (e.g., boxing, mixed martial arts).

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zz

Pilates studios. Pilates studios are a key player and represent an important consumer niche.
They focus on providing equipment-based instruction and training, both on an individual level
and in group sessions. There are also studios that offer clients mat based class instruction. Pilates
studios often deliver a specific style of Pilates methodology based on the background of the
lead instructor or founder (e.g., Balanced Body, Fletcher, Stott, Power, and Winsor). Finally,
some Pilates’ studios may differentiate themselves by offering Gyrotonics.

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Sports performance studios. Another segment that has gained in popularity over the
last decade is sports training. This segment focuses on providing coaching and training
intended to enhance athletic performance. These studios may follow the principles of
a specific discipline (e.g., Athletic Republic, Parisi Speed School, and Velocity Sports
Performance) or may incorporate their own principles in targeting athletes interested in
improving their sport-specific performance.

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Yoga studios. Yoga studios might be the most popular type of fitness studio. Not all yoga
studios are alike. There are some that focus on a particular style of yoga (e.g., Hatha,
Vinyasa, Ashtanga, Power Yoga, Ienger, Kundalini, Bikram, hot yoga and even aerial
yoga), while others may offer a variety of yoga styles in an effort to broaden their appeal
(e.g., Pure Yoga, YogaWorks). YogaWorks, Pure Yoga and Core Power Yoga are examples
of brands that have established a presence in multiple markets.

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CrossFit studios. CrossFit studios, of which there are literally thousands across the U.S.,
provide an environment for individuals passionate about pursuing the unique and
somewhat controversial form of exercise advocated by CrossFit. Besides the CrossFit
affiliates there are operators out there who are attempting to replicate the CrossFit
formula.

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Integrated performance studios. These are unique studios that have chosen to integrate
several disciplines to help individuals enhance their fitness, health and overall level of
physical performance. Many of these studios combine a variety of health and fitness
oriented disciplines, among the most common modalities incorporated include: personal
training, sports specific training, chiropractic, massage, nutritional counseling and even
acupuncture. An example would be Ezia Performance Labs in San Diego, California and
Zoom based in Frisco, Texas.

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Barre studios. Barre studios have blossomed over the past several years. Barre is based
on the movement principles originally espoused by Lotte Berk; incorporating movement
principles from ballet, Pilates and Yoga. In New York, Physique 57, a Barre based studio,
which opened its first studio in 2006, has grown to now occupy seven studio locations.
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Barre Bee Fit, a Chicago based Barre studio opened its first studio in 2009 and has grown
to now occupy 10 studios in the U.S. Interestingly, in the U.K. there are still official Lotte
Berk studios (the predecessor of Barre) in operation (Figure 1.2).
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Group cycling studios. Group cycling exploded onto the health and fitness club scene
in the early 1990’s. Since its introduction to the health/fitness club market, group cycling
has evolved into one of the industry’s most popular classes. In the middle of the last
decade (2000–2010), entrepreneurs saw an opportunity to establish an even more
unique group cycling experience by opening studios dedicated to group cycling;
attracting the more extreme devotees of group cycling. The most often cited example
of success in this genre has been Soul Cycle, which in just the past several years has
evolved into over a dozen studios and is now a sub-brand of Equinox. FlyWheel is
another prominent group of cycling studios with locations in several urban markets.

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Eclectic Group Fitness Studios. Eclectic group fitness studios are those that offer a specific
style or type of group fitness which may not be considered mainstream, or may be highly
targeted in the type of consumer it appeals to. Some examples of studios that serve a
highly targeted niche by offering a specialized or targeted form of exercise movement
include pole dancing studios, Nia movement studios and Zumba studios.

Figure 1.2

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Figure 2.1 Brand Value
Brand
Promise

Brand
Value
Fulfills
Customers
Emotional &
Tangible Needs

Delivery
Consistency

Figure 2.1: Brand Value

Numerator
„ Brand Promise. As expressed in the first section of this chapter, your brand promise
represents the promise of value you offer the market. The promise communicates to clients,
customers and prospects what they can expect to receive by engaging themselves with
your brand. The brand promise sets the table for your clients, customers and prospects
by letting them know exactly what they should expect to receive from you; tangibly and
intangibly. For example, at Zoom, a sports performance and physical therapy studio
based in Frisco, Texas they promise to provide a personalized experience for the athlete
in everyone and an experience that enhances individual athletic performance, builds
self-confidence and self-efficacy, and extends them a chance to establish enriching
relationships within the athletic community.

Denominator
„ Fulfills Clients/Customers Tangible and Emotional Expectations. Brand value is highly
dependent upon your ability to fulfill the tangible and emotional expectations that clients
and customers have established as a result of the promise you made. Your ability to
fulfill these expectations is critical to the power of your brand. Using the aforementioned
brand promise of Zoom, their clients expect to improve athletic performance, enhance
self-confidence and self efficacy, and finally to develop relationships with the athletic
community. If a client at Zoom achieves each of the core elements of Zoom’s promise then
the power of the brand is enhanced, but, if instead a client improves performance and selfconfidence, but never develops a connection with the athletic community, then the power
of Zoom’s brand is diminished. It is better to under promise and over deliver than it is to over
promise and not be able to deliver.
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Some Things to Think About when you file for Legal Status
Selecting the legal structure for your new business is just the first step in the process.
Once you have determined what legal structure is best for your business, then you need to
address some other key decisions. While these issues may differ slightly from state to state,
the major ones are similar no matter where you form your business. Following is a list of
issues you should carefully consider as you form your new legal entity.
„„ Identify the legal name for your business (you may want to complete a branding exercise
before doing this).
„„ Identify a registered agent and registered office for your business. A registered agent is
someone that is designated to officially receive and send legal papers on behalf of your
business entity. If you are forming an LLC or C-Corp this is a requirement. While you can
identify yourself or a business partner to be the registered agent, it is advisable to select
your attorney or accountant to be your registered agent with the state.
„„ Identify the owner(s) of the legal entity. If you plan to be the sole owner it’s easy, but if you
will have partners or shareholders (members in an LLC) then you must address this in the
formation of your legal entity.
„„ Create a company agreement. This is a legal document that provides specific details
about your company, including how decisions will be made, how owners will interact, and
in the event an owner wants to get out, how that will be addressed. If you file online they
will provide a basic agreement, but it is better to meet with an attorney and make sure the
agreement addresses the needs of the ownership group.
Once you complete your filing the state will forward you a Certificate of Filing and later a
Certificate of Formation.

Obtaining a Federal Tax ID (Employer Identification Number) for Your
Business
Once you have established a legal business structure the next step is to file for a federal
tax identification number (EIN). Your EIN is your business’ “social security number.” Your EIN
is your business’ fingerprint and is the means by which the government keeps tabs on you.
Once you have your Certificate of Formation as a legal entity then you can file for your
EIN, either online through the government (www.irs-tax-id.com) or through your attorney or
accountant. The process only takes minutes when done online and once you are registered,
the government will provide confirmation of your Federal EIN. Your Federal EIN is used in a
variety of ways, including:
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Building a Plan for your Studio; Core Attributes of a Quality Business Plan
„„ Do your due diligence and understand the market dynamics. The first step in the business
planning process involves conducting the necessary research to understand local market
dynamics and how your studio’s concept or value proposition fits. Investors want to understand,
as should you, the underlying business opportunity and how your concept can take advantage
of that opportunity, assuming it exists. When facilitating your research, whether on your own or
with the assistance of a professional you want to address the following issues.
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What are the needs of the local market and how well is it being served? For example, if your
studio concept involves offering integrative sports performance, you want to know if there is a
demand for it in the market (number of middle and high school athletes, HH income, number
of sports teams, etc.) and what offerings already exist (existing sports performance studios,
clubs that offer sports performance services, programs offered by schools, etc.). It is also
important to identify the leading competitors and how you will differentiate yourself from them.

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How does your concept or value proposition differ from what already exists? It is important
to you as the business owner, but also to investors, to understand how your concept differs
from what already exists in the marketplace. Gaining clarity on your concept’s unique sales
proposition and its implications for business success are critical.

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Obtain benchmark data on other studios and the industry in general. It is vital for you
to understand what the “norms” are in the industry as it pertains to market penetration,
revenue generation, expenses, investments, etc. Investors need to have confidence that
you understand the dynamics of the business and have addressed them in your plan. As
the owner you need to understand these dynamics to assist in the development of your
financial projections.

Once you have completed the research, document the key insights and their implications for
your business.
„„ Present your general business model. Having completed your market research, your
next step is to clarify the concept or business model for your studio. The business model
is intended to provide an overview of your business vision. Typically, you would find the
following set forth in this part of your business plan.
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Concept overview

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Description of your value proposition and how that makes it unique or different in the
marketplace
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