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FDD Talk: The CycleBar Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on March 28, 2016

in FDD Talk 2017: Fitness Franchises, Fitness Franchises, Franchise Earnings

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CycleBar Franchise Photo

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the CycleBar franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a CycleBar franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of CycleBar’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average gross revenue, merchant services, payroll, rent, marketing, insurance, utilities, bike lease, equipment, website + software, general operations expense, total expenses, EBITDA before royalty, royalty at 7%, and EBITDA after royalty for the 2 CycleBar studios (Wellesley, MA and Royal Oak, MI studios) that were in operation for at least 12 full months during the period from January 1, 2014 to December 31, 2014, and co-owned by individuals with a minority interest in the franchisor

Section I – Background Information

Indoor cycling, often called spinning, was becoming increasingly popular after the turn of the new millennium, but Bill Pryor and his sister, Alex Klemmer, were dissatisfied with the usual approach of a few stationary bikes added into most fitness centers.

In 2004, they decided to go all-in on creating one of the nation’s first independent indoor cycling studios in their own neighborhood in Boston, which opened in 2005 under the name of Spynergy. The studio was a major hit, attracting people looking for a high-energy immersive experience.

After spending ten years perfecting their concept and with three locations up and running, the name was changed to CycleBar and they began franchising in 2015 with the ambitious goal of having 100 studios up and running by the end of 2016.

Now headquartered in Cincinnati, OH, here’s how CycleBar keeps the wheels turning in the highly competitive boutique fitness segment:

Three Key Ingredients

What Pryor and Klemmer perfected was the three key ingredients that go into a superior indoor cycling session: awesome instructors (called CycleStars), killer music (the playlists are called CycleBeats and can be downloaded online), and an intense environment.

That intense environment includes energy-enhancing video graphics and light shows, as well as rider-specific performance data right on the bike (CycleStats). That’s why the workout rooms at CycleBar are called CycleTheatres with their professionally engineered lighting and sound equipment. The multi-sensory experience is often described as downright intoxicating.

This is no light workout, either. The instructors are highly-trained to keep riders motivated and pushing hard to their outermost limits. They help riders “Rock the ride, each and every time” as their motto states.

Concierge-Level Customer Service

A CycleBar location is not your mama’s fitness center or standard gym. Everything is high-tech. Reserving your spot in a class can happen online, and check-in happens at an electronic kiosk when you arrive. Customers can specify not only their preferred instructor, but even the specific bike they want to ride for their immersive experience.

New Leadership for a New Era

Leading the company’s ambitious drive to have 100 studios open for riders by the end of 2016 is Heather Harris, CycleBar’s new president. Before coming to CycleBar, she drove strategic planning and a successful turnaround of Donna Karan Intimates.

Competitive Pricing Model

Fueling the chain’s attraction to fitness buffs is its competitive pricing model, where customers pay by the class. In a segment where individual classes can often run as high as $34, CycleBar keeps its per-class pricing to around $20.

Because the focus is not on selling and tracking monthly memberships, a lot of the overhead other boutiques have to deal with has been eliminated. The result is surprisingly strong margins at the unit level.

And customers who opt to purchase multiple-class packages can see their per-class price drop to as low as $12 per class in some locations.

Section II – Estimated Costs

  • Please click here for detailed estimates of CycleBar franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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