The Multi-Studio Membership Model: Partner or Competitor?
Have you heard about the new kid in town? Almost overnight, an
innovative, tech-driven business model has arisen in the fitness
industry that’s reinventing how consumers access gyms and experience
exercise. It’s called a multi-studio membership. For one
low, recurring monthly fee (typically $99), fitness consumers who’ve
signed up for a membership gain access to countless studios/gyms and
hundreds or thousands of classes in their cities, and sometimes in other
cities, too.
Consumers simply reserve classes using a central website or mobile app
and away they go to work out. There’s no need to be a member at any of
the gyms or studios. Instead of paying a drop-in fee to the studio where
they take a class, consumers pay a monthly online subscription directly
to the multi-studio membership company, which then pays a preset rate
back to the studio. This relatively new business model goes by names you
may recognize: ClassPass, Fitset and FitReserve, among others.
The model is an obvious boon for those fitness consumers who like choice
and need variety to stay motivated. Plus, the low monthly fee for
unlimited classes removes budget barriers to exercise while allowing
patrons—the majority of whom are women in their 20s and early
30s—admission to specialty and boutique studios they might not otherwise
be able to afford. That’s a huge win for consumers, especially if the
all-access pass helps them stay active. But is it a win for fitness
business owners? Some are skeptical. Drawing on diverse perspectives
from studio owners, creators of these startup companies and consumers
themselves, this article unpacks the advantages and potential drawbacks
of the bourgeoning multi-studio membership trend.
More About Multi-Studio Memberships
Anything that hints at discounts brokered through a third-party
—à la
Groupon—might conjure up horror stories about deals gone wrong for small
businesses. However, Payal Kadakia, New York–based cofounder and CEO of
ClassPass, explains that her company is not the same thing as Groupon at
all. “ClassPass is not a one-off product,” she says. “We are a monthly
membership that creates a reliable and substantial revenue stream for
studios, whereas Groupon creates a short-term spike.” That’s an
important distinction when it comes to the kind of clientele studios
might host.
“Because [ClassPass is] a membership, there’s also a strong sense of
community,” says Kadakia. “Our members are all committed to living an
active lifestyle (they’re fitness enthusiasts, not deal seekers), and
they are attending and exploring classes that resonate with them. This
commonality means our users are highly engaged, and as they frequent
places they like, they are forging relationships with other users,
studio staff and trainers.”
Another service, FitReserve, provides access to classes at 50% off
studio drop-in rates, and its monthly membership fees are in line with
the average membership prices of the studios across its platform. “Given
the comparable price point,” says Megan Smyth, MBA, cofounder and CEO of
FitReserve, in New York City, “we’re helping studios attract
higher-quality customers who aren’t just looking for a deal and who are
able to afford studios’ regular price points.”
Heather Lind owns and operates Wholey Fit, which offers indoor cycling,
group fitness and personal training. Her small studio was recently added
to ClassPass in Vancouver, British Columbia, where her business is
located. “When I tried one of those Groupon-type companies, there was no
control, and it turned into massive chaos,” says Lind. “ClassPass has
really taken that into consideration by allowing each studio to choose
the classes they want to offer.” With this choice, some studio owners
put a velvet rope around their most popular and/or primetime classes,
restricting them to studio members (i.e., no ClassPassers). Owners can
also limit the number of open spots per class or select which class
formats to offer.
The multi-studio membership companies have their own sets of controls,
as well. For example, members of both ClassPass and Canada-based Fitset
can visit the same studio, or chain of studios/gyms, just three times
within one monthly billing cycle. This prevents them from joining the
same class every week (unless they become a member at the studio, of
course). FitReserve grants its members access to each participating
studio or chain up to four times per month.
If ubiquity is any indication, this business model is working for
consumers and many studios. ClassPass, the most pervasive by far, is
setting the pace. Available in 34 cities (at press time) and aligned
with 4,000 facilities across the United States, Canada and London,
ClassPass is valued at around $400 million (ballpark estimate, at press
time). This startup business, launched in 2013, recently acquired one of
its competitors: FitMob.
Fitset can be found in five major Canadian cities so far, and FitReserve
allows members to select from more than 25,000 classes per month at 175 fitness
studios in New York City (with plans for expansion to additional cities).
All-access passes were first established for boutique fitness: intimate,
upscale studios that deliver a handful of specialty workouts. However,
you’ll find some big-box companies—such as 24 Hour Fitness®, Crunch
Fitness and the Canadian chain Steve Nash Sports Club—on the ClassPass
roster, as well.
The model is quickly becoming a serious contender in the fitness
business space—it’s not just a “buffet fitness” fad. But not all
business owners view multi-studio memberships as a positive
game-changer. While some describe it as a welcome partner and support
for small businesses, others call it a threat or remain on the fence.
And then in the middle of it all, there’s the fitness consumer.
Biggest Benefits for Studio Owners
For Lind, adding her studio to ClassPass was the right decision. “For a
small studio on a budget, it’s such a win-win situation,” she says. “My
brand gets more exposure, and I even make a bit of money on it.” The
benefits studio owners reap from their involvement with multi-studio
memberships may depend on the brand, its services and location, how
established the studio is, the studio owner’s business proficiency, and
other factors. Perhaps the most common benefit associated with
multi-studio memberships for studios is the ability to drive traffic.
Following are some additional benefits.
New Clients Without the Marketing Costs
Attracting newcomers to classes provides two possible perks. First, the
studio owner may be able to woo interested visitors into becoming
permanent members. Jacob Stief, CEO of Fitset in Toronto, says “If
[Fitset] members discover the one place they love, we don’t have
contracts in place to hold them back from signing on at one of our
partners.” None of the multi-studio membership companies mentioned in
this article require long-term contracts.
Second, guests who aren’t likely to sign up at a studio still bump up
class revenue, especially for classes with lower attendance. Speaking
for her company, FitReserve, Smyth says it’s a “cost-effective marketing
platform” and a means to “fill empty seats, thereby driving incremental
revenue to studios.” FitReserve also offers its members insider
discounts on private training, workout apparel, nutrition services and
more, so studios can market their nonclass products and services, too.
Jillian Dreusike is the owner and founder of Allongée®, a Philadelphia
studio focused on a proprietary exercise technique involving barre work
and cardiovascular exercise. She says her studio has gained more student
traffic as a result of being on ClassPass. “[We see] so many new faces,
and our program is . . .
unique, so everyone always comes back,” she
says. “It’s great because it has exponentially increased our exposure
and brand awareness in the community. With ClassPass bei ng a national
brand, we get a lot of out-of-towners who find us on the platform, as
well.”
Lind’s experience is similar. “I’ve gotten new people into my studio,
and that’s a huge benefit. It’s gold to have my studio advertised by a
company that’s targeting a large amount of people who could be potential
clients!” she says. “Also, boutique studios are a bit pricey—we have to
be in order to pay the rent—so I think we miss out on some potential
customers simply because they don’t want to spend that kind of money on
something they might not like. ClassPass allows them to sample
[different] studios, and if they find one they really like, they’ll
invest their fitness money into that one.”
Being new to the service, Lind hasn’t converted any ClassPassers yet,
but Dreusike has. “Many of them come in for their first class thinking
that it’s a traditional barre class, but find that it’s so very
different!” says Dreusike. “I think that’s what keeps them coming back
(and switching over from ClassPass). We’ve met so many ladies who
probably wouldn’t have made it into our studio without ClassPass.”
ClassPass says 65% of its users are new to the boutique fitness market
when they sign up and 70% are first-time attendees, i.e., they’ve never
been to those studios before. This can help facilities get the word out
about their programming. “Our community of fitness enthusiasts are
actively searching for fitness content and classes, so we provide an
ideal platform for studios to expand their brand presence,” says
Kadakia. “We’re connecting an untapped market of clients to our studio
partners every day.”
Lashaun Dale, MA, MPH, vice president of group X creative for 24 Hour
Fitness, sees this effect in reverse, where fans of boutique studios are
testing the waters with, or rediscovering, all that bigger gyms have to
offer. “ClassPass has great enthusiasm for group exercise, as do we, and
we were excited to showcase our classes to their clients who may have
experienced only boutique workouts,” she says. “We are enjoying the new
guest traffic and a chance to rethink and reimagine the guest/new-member
journey . . . as a result of these unique leads.” She says they have had
success converting ClassPass members to 24 Hour Fitness memberships.
Power in Numbers
Most small studios don’t have the clout or big budget that large gym
chains possess, making it hard to compete on services and pricing.
Multi-studio memberships help level the playing field, says Stief. “The
majority of Fitset’s unique studio/gym partners are local boutique
facilities that just don’t have the economy of scale that the big-box
facilities do,” he says. “Fitset brings them all together, creating
something greater than the sum of its parts. We’ve introduced a viable
model to unite our local studios and really build a fantastic community
of owners and fitness enthusiasts.” Similarly, Smyth says FitReserve
allows studios to cross-market their classes with other studios to reach
a broader audience.
Insights and Business Support
Multi-studio memberships keep close tabs on user data, providing rich
insights into a studio’s target clientele. “ClassPass aggregates fitness
content and classes, so we have significant data on the fitness market
and trends,” says Kadakia. “We know what classes are popular at what
times, and that information is valuable to our partners.” There are
stats on class sign-ups, of course, but also on user experience; in
fact, you’re unable to reserve another class in the ClassPass system if
you haven’t yet rated the last class you attended. “We have [a thorough]
understanding of users’ behavior because we compile reviews on every
class our users take,” says Kadakia.
ClassPass shares insights with studios and has developed other tools to
help them optimize their businesses, such as a business-to-business
blog, monthly webinars and a database of instructors for hire. “We are
doing things to be a strategic partner to them and not just a
transactional service,” says Kadakia. ClassPass also lends financial
support to budding entrepreneurs. For example, Dreusike received capital
in the form of a one-time, advanced payment (for future reservations)
through ClassPass in order to open a new studio location. “In some
cases,” says Kadakia, “where ClassPass traffic has exceeded a studio’s
expectations, we’ve helped them add classes or new locations to develop
their business.”
Potential Drawbacks for Studio Owners
While some fitness business owners see value in multi-studio
memberships, others believe participating in the model would dilute
their brand and/or devalue their offerings. Industry veteran Jarod
Cogswell isn’t sold on the trend. “These organizations may provide a
little bit of revenue, a tiny bit of exposure, but hardly any real
business,” says Cogswell, a fitness business coach and consultant and
the operator of a hybrid fitness facility called FIT Academy, in
Beaverton, Oregon. Read on for some of the challenges studio owners
report.
Users Reluctant to Join Individual Studios
After being on ClassPass for 2 months, Cogswell decided it was a mistake
for his business and quit. “ClassPass users were not part of our culture
and were never going to join our facility,” he says. In a May 2015 Club
Insider article, Cogswell wrote about how a guest admitted that she
wouldn’t be buying a membership from him because the ClassPass option
was cheaper and still allowed her to work out at his facility (and
others). For that reason, Cogswell regards multi-studio membership
companies as competitors and calls them “the silent assassins of the
brick-and-mortar fitness studio.”
“They promise marketing, exposure and revenue. However, they’re the ones
that see the real benefit, not us,” says Cogswell. “They don’t even
really know our facilities or how to run them. Their marketing of
individual clubs is really weak, and the revenue is heavily discounted
guest fees.”
Raised Eyebrows From Regulars
In the midst of trying to recruit potentially resistant multi-studio
users, facility owners may face concerns from their loyal members. For
example, members might catch wind of the fact that they’re exercising
alongside someone who paid less for their spot in the same class. How to
justify the discrepancy? “It became an ethics issue,” says Cogswell.
“Why am I charging a fee that reflects the facility’s value to our
members and clients, but not [charging the same amount] to these
outsiders?”
Plus, what’s to stop studio members from eventually making the switch?
“One potential downfall would be that one of my regulars might hear
about ClassPass and decide that it’s better for [his or her] budget to
do that rather than just be a member at my studio,” says Lind.
There’s also the concern that users of multi-studio memberships will
crowd out regulars. “One person . . . told me that when she found out
her regular gym was on ClassPass she was a bit upset because it meant
that some of her favorite classes might fill up and she wouldn’t be able
to get in,” says Lind. “I’ve kept the classes I offer restricted to only
my really quiet classes. I would never risk upsetting current clients
who attend my busiest classes.”
In theory, that’s a good plan. But studio owners might get stuck trying
to balance happy members against a desire to effectively leverage new
contacts. Generally, classes with lower attendance are that way for a
reason: The timeslot is troublesome, the format is less popular,
and/or—truth be told—the instructor is not as skilled as others. Perhaps
a prospect is less likely to spring for a full membership to all of a
studio’s exceptional services when he or she has only been able to
sample what’s middle of the road. (Of course, some studios aren’t
looking to recruit a slew of newbies—they’re already busy enough. In
that case, farming out slow or off-peak classes for a revenue boost
makes sense.)
Variety Gone Wild
Finally, variety is often touted as a big benefit to multi-studio
memberships, but all this jumping around from class to class has a
potential downside for both consumers and the fitness pros who teach
them. “One of the things I see as a drawback is the fact that clients
pop in and out of so many different techniques and so they’re not really
taking the time to master any of them,” says Dreusike. For some, the
multi-studio membership permits “fitness speed-dating” with no intention
of committing to a meaningful relationship. “ClassPass users are savvy
fitness consumers and good people,” says Cogswell, “but [having them]
show up every once in a while did not benefit our culture, which is the
number-one characteristic of any successful fitness operation.”
Opportunities for Everyone
So what’s next? Do we decide that multi-studio memberships won’t work in
the long run, and so we nip them in the bud? Cogswell calls on business
owners and big clubs to “band together and shut them out.” He says,
“We’re the ones actually feeding the monster, not the consumer.”
Or do we embrace this system as a new normal of doing business in the
fitness industry? Ultimately, studios and gyms can choose to use
multi-studio memberships a little or a lot, to opt in or opt out.
“ClassPass only grows if the entire industry grows,” says Kadakia.
“The fitness industry is evolving,” adds Stief, “and the growth of
businesses like Fitset is where the industry is heading. Customers are
demanding flexibility, choice and community.”
Remember: Most multi-studio users are from the Millennial generation—the
industry’s new wave of customers. Perhaps we’ve landed on a
technologically convenient model that resonates especially well with
young people. Says Kadakia about ClassPass, “We’ve gotten a lot of
people committed to fitness for a long time, more than they ever have
been before, which ultimately means there’s more money for the entire
industry.” But inspiring more folks to fitness is a work in progress.
“Fitness is still hard,” says Stief, “even with the improvements that
the multi-studio model has introduced.”
Cogswell maintains that the best way to get more consumers into
facilities is with passionate staff and a community of committed members
and clients. “We all know how scary coming into one facility can be [for
consumers], let alone multiples,” he says. “It’s our job as facility
owners to attract and change lives for those who need us. You can only
really do that by forming trusting relationships.”
The role of fitness professionals is to collectively inspire, influence
and respond to consumer demand. Perhaps that fact will inform our next
steps. “Consumers want access to the classes and workout experiences
that are personally specific, of interest to them and convenient to
their lives—and they will support and pay for that access,” says Dale.
“If we all simply approach our work from the eyes of the member[s]—what
moves them and makes it easy for them to train with us—then it won’t
matter how [people find] us. They will want to stay.”