FDD Talk 2019: CycleBar Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a CycleBar franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned CycleBar outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of CycleBar’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• average, median, highest, and lowest gross revenue during the 12-month period ending March 31, 2019 for the 117 franchised CycleBar Studios that were open and operating throughout the time period commencing January 1, 2018 and ending March 31, 2019 (“Franchised Studios”)

• average, median, highest, and lowest gross revenue during the 12-month period ending March 31, 2019 for the 11 franchised CycleBar Studios that actively conducted a Pre-Opening Support Program and generated clientele prior to opening in accordance with CycleBar’s current System standards, practices, and specifications (“New Model Studios”)

• percentage increase in the cumulative gross revenue generated in each calendar month beginning in January 2018 through March 2019 by (a) the Franchised Studios, and (b) the New Model Studios, as compared to what these respective Studio groups generated in total gross revenue over the same calendar month in the immediate preceding calendar year

• average number of active members for each calendar month beginning in January 2018 through March 2019 amongst (a) the Franchised Studios, and (b) the New Model Studios

Section I – Background Information

18 Things You Need to Know About the CycleBar Franchise

Parent Company Sets Sights on International Expansion

1.  In early March 2018, Xponential Fitness – the parent company of CycleBar as well as several other boutique fitness brands – unveiled plans to significantly grow its portfolio of brands internationally, through a master franchise strategy.

2.  The global expansion kicks off with the announcement of a master franchise agreement with entrepreneur Oliver Chipp, who expects to open at least 30 CycleBar studios in the United Kingdom over the next five years. The first U.K. CycleBar was set to debut in London by June 2018.

3.  Xponential Fitness’s global growth is led by a veteran team with proven experience expanding U.S.-based fitness brands internationally, including CEO Anthony Geisler who built LA Boxing into the largest boxing, kickboxing, and mixed martial arts fitness concept in the country before selling it in one of the biggest deals the industry had ever seen.

4.  John Kersh has also joined the team as chief international development officer. Kersh was instrumental in growing Anytime Fitness into the largest fitness franchise in the world.

5.  The team is now looking to replicate these successful strategies at Xponential Fitness by offering entrepreneurs from across the globe the opportunity to build a portfolio of category-leading U.S. boutique fitness concepts, including CycleBar, Club Pilates, StretchLab, Row House, and future brands in all parts of the world.

6.  According to Kersh, “What we’re creating at Xponential Fitness hasn’t been done before and there’s enormous consumer interest in boutique fitness across the globe that we intend to capitalize on. We couldn’t be more excited to have Oliver launch our international expansion by bringing the CycleBar brand to the United Kingdom through a master franchise agreement. We expect the U.K. to be the first of many successful international markets for Xponential Fitness.”

7.  Backed by partner TPG Growth, the middle market and growth equity platform of alternative asset firm TPG, Xponential Fitness not only has the leadership team, but also the financial capabilities to assist international master franchisees in their quest to develop Xponential Fitness brands overseas.

8.  Xponential Fitness is currently seeking entrepreneurs who not only possess adequate capital to build out multiple locations, but just as importantly, understand the vision and potential growth of the brand. Master franchisees have a wide range of options with Xponential Fitness and can choose to sign on to develop one or multiple brands under the Xponential Fitness portfolio.

9.  The company is specifically looking to develop its brands in Europe, Asia, Australia, Africa, and Latin America, but is open to additional regions, depending on the market demand and partner.

Newest Location Opened in Tennessee

10.  At the beginning of September 2019, CycleBar opened one of its newest studios in Brentwood, Tennessee. CycleBar already has four Nashville-area locations. Husband-and-wife franchise owners Brad and Trish Spivey have created H&S Music City Holdings, Inc. to own and operate the Maryland Farms Brentwood franchise.

11.  CycleBar Maryland Farms celebrated its grand opening with more than 2,000 free rides available to the public as well as local businesses and groups interested in hosting their own exclusive, free private ride from September 3 to 9.

12.  Trish Spivey said, “We are thrilled to have the opportunity to bring Premium Indoor Cycling to Hill Center Brentwood. Sister studio to our flagship location, CycleBar The Gulch, and CycleBar West Nash, our Maryland Farms location will offer concierge-level service to our riders from the time they enter the studio until the time they leave.”

13.  In addition to regularly-scheduled classes, the studio will also be available for private studio rentals for corporate team building events, birthday parties, bachelor or bachelorette parties, and more.

14.  According to a news release, the studio is also able to give back to the Brentwood community by offering charitable giving rides through the philanthropic platform CycleGiving. For these types of rides, CycleBar will provide a CycleStar instructor and staff to facilitate the 45-minute class and access to the community room for a social gathering following the ride.

15.  Trish Spivey added, “CycleBar is a space where people of all ages, fitness levels and walks of life can come together in a judgment-free environment to not only better their health, but also their hearts and minds.”

Company History

16.  CycleBar was founded in 2004 by Bill Pryor and his sister Alex Klemmer in Boston, Massachusetts. At the time, the popularity of indoor cycling was on the rise and Pryor and Klemmer saw an opportunity to become one of the first independent cycling studios in the United States. Additionally, Pryor and Klemmer wanted to offer consistent, high-quality cycling classes at more affordable prices than at other boutique fitness brands.

17.  Following the success of the first CycleBar, Pryor and Klemmer slowly opened more locations before launching an official franchise program in 2015. Less than a year later, CycleBar announced that it had signed more than 200 studios across more than 50 new markets. In October 2017, the company was acquired by Xponential Fitness, which owns many other boutique fitness brands, including Club Pilates, StretchLab, Row House, Pure Barre, YogaSix, AKT, and STRIDE.

Entrepreneur’s Franchise 500

18.  CycleBar ranked No. 492 on Entrepreneur’s 2019 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of CycleBar franchise costs, based on Item 7 of the company’s 2019 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on CycleBar’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  54
• Net Change:  +52

2017

• Outlets at the Start of the Year:  54
• Outlets at the End of the Year:  117
• Net Change:  +63

2018

• Outlets at the Start of the Year:  117
• Outlets at the End of the Year:  152
• Net Change:  +35

Company-Owned

2016

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  0
• Net Change:  -1

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• In the Item 19 charts below, CycleBar discloses certain historical performance information reported to it by:

• (i) the 117 franchised Studios that were open and operating throughout the time period commencing January 1, 2018 and ending March 31, 2019 (collectively, the “Franchised Studios”); and

• (ii) the 11 Franchised Studios that actively conducted a Pre-Opening Support Program and generated clientele prior to opening in accordance with CycleBar’s current System standards, practices, and specifications (the “New Model Studios”).

Part 1 – Average Gross Revenue Amongst Franchised Studios Over Measurement Period

• In Part 1 of this Item, CycleBar discloses the average and median “Gross Revenue” generated over the 12-month period ending March 31, 2019 calendar year amongst (a) the Franchised Studios, and (b) the New Model Studios, as well as the high and low reported Gross Revenue values reported within each of those groups of franchisees.

Franchised Studios