Last month, Stephanie Blodgett marked an important anniversary with a post on Instagram – it had been seven years since she opened a Pure Barre franchise studio in Salt Lake City, Utah — something she described as a completely life-changing event.
In three short years, Blodgett went from being a client at a Pure Barre studio in Lexington, Kentucky to becoming an instructor and then setting up her own franchise location. The revolving door of clients at the Lexington studio had given her the confidence to open her own franchise location and commit to a five-year contract.
"Maybe I was naive," she told Business Insider in a recent conversation. "I think I went in blindly thinking: 'This is going to take off, everybody is going to love it, and I'm not going to have any issues.'"
Today, a Pure Barre franchisee can expect to spend between $198,650 and $446,250 to open a studio. This includes the $60,000 franchise fee but doesn't account for the cost of leasing or buying a space.
The first two years were tough for Blodgett, she had to educate prospective clients about this new fitness concept, which for the uninitiated is a mix between ballet and pilates that was at that stage popular on the east and west coast of the US but completely alien to the residents of Salt Lake City.
By the end of the third year, her hard work had paid off – the studio was in high demand, classes were waitlisted, and she had to call in more teachers.
"Word had gotten out about how amazing the technique was," she said.
But her winning streak was short-lived. Within the next 12 months, the boutique fitness craze was spreading and newer concepts were cropping up in the area and luring customers away with shiny new marketing. Some of Blodgett's clients moved to other studios to test out trendy new workouts and sales at her own studio fell. Once her five-year contract was up, after a brief extension, she was forced to close.
"The decline came from different concepts coming in and getting more saturated," she said. "It boils down to the trends, people are super trendy and when something new comes out they are interested to try it."
"The saddest thing is the product is amazing, there's nothing else like it out there but it's about who is marketing themselves better and who is aggressive enough to go after that clientele," she added.
Blodgett isn't alone. Other studio owners are having to make similar choices as the market becomes increasingly saturated with options at the end of a decade of intense growth and trends constantly shift.
There are signs that growth is stalling for some of the biggest players in the market. Last month, indoor cycling studio Flywheel, a leading rival to SoulCycle, said that it would be closing 11 of its 42 studios in the US, including all of its four Los Angeles locations.
SoulCycle, which halted its plans for an IPO in May 2018, saw user growth stall at the end of 2018, according to customer purchase data tracked by analytics firm Second Measure (SoulCycle denies the data's findings) and Rumble Fitness, a New York-based boxing-inspired workout class has been trying to raise funds for months, Bloomberg recently wrote.
This is all prompting experts to ask: Have we hit peak boutique?
Boutique fitness breeds fickle customers
Part of the allure of working out at a boutique fitness studio is that you have the flexibility to test different workouts without being constrained by a gym membership. But, this often creates a fickle customer who will try something out a few times before moving on to the next big thing, especially when they don't have monthly or annual gym membership fees to keep them loyal.
"The model for a long time was the monthly membership and at least in that sense people felt, 'Well I'm paying for it so maybe I should show up,' if they were inclined to show up in the first place," Jason Kelly, author of "Sweat Equity," said in a recent conversation with Business Insider. Kelly discusses the economics of the fitness world in his book.
"The business model of 'pay as you go' cuts both ways," he said. "It provides you an opportunity to grab people pretty easily but then they have no real economic incentive to stay with you."
ClassPass, a company that offers a membership program providing access to an array of classes across different studios, could be making this problem even worse.
It's "the go-to option for the fickle, budget-conscious urban exercise addict," Kelly wrote in Sweat Equity, adding that it is a staple for the "restless Millennial" who wants to mix and match their workouts throughout the month and not get in a rut by "gorging" themselves on one type of fitness.
This attitude can make it hard for studios to convert these guests into long-term, steady clients – if people enjoy the flexibility of the program, why go back and buy a separate membership at a specific studio? ClassPass would argue that it actually helps out boutique studios by filling up classes and introducing these studios to a new set of customers.
Social media is also playing a part here. It is the "ultimate FOMO accelerant," Kelly said as it encourages customers to move from product to product more quickly and stay ahead of the trends.
Customers are browsing Instagram thinking: "'That person looks super happy doing that new workout, maybe I should try that," he said.
Pushy investors fuel the fire
Supply in the market is also growing, partly because the barriers to entry are generally low – setting up a studio can be as simple as renting a space, finding instructors (who could be paid per class), and buying equipment if it's required, which means that it's not impossible for anyone to enter the market.
Sarah Love, who owns two Pure Barre studios in Richmond, Virginia, and co-owns another, has noticed new mom-and-pop studios popping up in her area offering "knock-off" versions of the Pure Barre workout. She doesn't necessarily see this as a bad thing though, her sales are still strong and having similar studios helps to create awareness about the style of workout, she said.
But for others, it can make it harder to stand out.
"It's a race," Blodgett said. "Who can do it better? How can you reinvent yourselves? How can you keep the race up? How can you make yourself more unique from everyone else? We are all doing the same thing just reinventing the wheel and trying to sell it differently. When you've got another concept a mile away you have to make sure you're staying on top of it and offering something that no one else can offer."
For some of the larger franchise chains, rapid growth has been driven by pushy investors.
Over the past decade, the private-equity sector has been aggressively investing in boutique fitness chains – TPG recently purchased Crunch, L Catterton, the largest retail-consumer focused private-equity firm in the world has a stake in Equinox, Peloton, Pure Barre, and ClassPass, among others – and the goal for many of these firms is to drive rapid growth and propel the company toward an IPO.
Blodgett blames just this for Pure Barre's rapid growth. When Pure Barre's founder, Carrie Door, stepped down from the business in 2015 and L Catterton took a majority stake in the company, she said that noticed the business changing.
"It became more about the numbers and growing and growing and growing. It grew way too fast and they put studios too close to each other. When you do that, you hurt both studios because you have to share clients and the revenue then goes down for both," she said.
In 2018, Pure Barre was acquired by Xpotential Fitness. A spokesperson for Xpotential said in an email to Business Insider that Pure Barre currently has more than 550 locations across the US and Canada and plans to grow this to 680 locations by the end of 2021. She added that it has only closed 2% of studios in its history.
"We have a rigorous process in place to determine how many Pure Barre studios a market can accommodate. We have partnered with the data analytics powerhouse, Buxton, to help Pure Barre better understand who our clients are and where they live by studying our current client base," she said.
AKT (Anna Kaiser Technique), another Xpotential Fitness-owned company, has just set out in the franchisee business, opening itself up to franchises in September and planning to grow to 500 new studio locations by 2021.
Blodgett thinks this is a big mistake. "Do not grow too fast," she said. "You are setting yourself up for major trouble."
Studio owners don't only have their immediate competitors (fellow studio owners) to worry about, the rise of high-tech home fitness options means there's now a new and growing force in the market.
Peloton has led the way here. Since it launched in 2012 with its high-tech indoor bike, it has seen sales skyrocket and has recently filed for an IPO, which could value the company at more than $8 billion. Experts say that it has solved one of the biggest downsides of working out at home: having to work out alone and not having the encouragement of a group to keep you motivated.
"They have managed to use technology to create a sense of community so people feel like they are part of something, they get both the convenience and the social aspect," Kelly said.
Since Peloton launched, other home fitness concepts have cropped up (Hydrow, Tonal, and Mirror to name a few), Flywheel and SoulCycle have created their own versions of the bike, and ClassPass has rolled out a new membership program, which enables customers to live-stream classes from home.
Kelly believes there's still room for both concepts to grow as fitness and wellness remain a top priority for many customers.
"I don't think in five years from now, you and I would be talking and saying: 'You know what's great? Smoking or being morbidly obese,'" he said. "There is a segment of the population that is going to continue to pay to have that in-studio experience, but what I think you may see less of are the very specific modalities where it's something that could fade in and out of popularity."
What we are seeing now is just a rationalization, he said. "It just got so big so fast."