FDD Talk 2021: 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 2021 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 2021 FDD

• Section IV – Number of franchised and company-owned CycleBar outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of CycleBar’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year as well as the first two calendar months of 2021, by the franchised CycleBar Studios that were open for at least 12 calendar months (“Disclosed Studios”)

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year as well as the first two calendar months of 2021, by the Disclosed Studios that were actively providing the Approved Services within their respective Studios (the “Disclosed Studios with Active In-Studio Operations”)

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year as well as the first two calendar months of 2021, by the remaining Disclosed Studios that were forced to cease in-Studio operations for 1 or more days within the applicable calendar month (the “Disclosed Studios with Interrupted In-Studio Operations”)

Section I – Background Information

14 Things You Need to Know About the CycleBar Franchise

Partners with Magee-Womens Research Institute and Women Who Rock

1.  At the end of August 2020, CycleBar announced its partnership with Magee-Womens Research Institute (MWRI) and Women Who Rock to raise awareness and funds for life-saving women’s health research. September is National Ovarian and Gynecologic Cancer Awareness Month, and throughout that month CycleBar educated their riders from coast to coast about the work taking place at MWRI, specifically as it relates to cervical, uterine, and ovarian cancer.

2.  Trevor Lucas, president of CycleBar, said, “CycleBar’s purpose is to empower riders, staff, and the community to create positive change in not only themselves, but the world around them. That, coupled with the fact that over 80% of CycleBar’s members nationwide are female, it made perfect sense to partner with Magee-Womens Research Institute with their focus on research and advancements in women’s health.”

3.  Researchers at MWRI are seeking to understand the underlying factors that cause ovarian cancer to spread, as well as why it reoccurs after treatment. They are also examining why chemotherapy isn’t effective on certain types of gynecologic cancers. In addition, they are developing novel drugs that may directly target ovarian cancer stem cells. MWRI also supports numerous clinical trials for patients undergoing gynecologic cancer treatment.

4.  Michael Annichine, CEO of MWRI, said, “Thousands of women fight gynecologic cancers every year. At MWRI, we have laboratory research that seeks to understand what causes these cancers in the first place, and how we can prevent them from recurring. In the clinic, we have dozens of clinical trials exploring drug therapies, vaccine potential and the role immunology can play in improving treatment. We aspire to someday eliminate these cancers altogether – until then, we are dedicated to creating the most effective treatments possible and improving the quality of women’s lives.”

5.  Women Who Rock will be powering a high voltage playlist featuring all female artists, which will be available for all riders and will be partnering with all parties for an online awareness campaign. Women Who Rock hosts an annual benefit concert featuring the best women in music, with a 100% female-fronted line up. The event also includes The Women Who Rock Impact Award, interactive women’s health pop ups, a silent auction, VIP hospitality lounge, and a fully interactive beauty bar that has featured CycleBar the last two years. Proceeds from the benefit concert support Magee-Womens Research Institute.

6.  Melinda Colaizzi, founder of Women Who Rock, added, “We’re so thankful for amazing partners like CycleBar, especially since health and wellness are at the core of what they stand for. Women Who Rock is excited to power a high energy music playlist featuring some of the best women in music, to Rock Your Ride during the month of September, and expand our partnership into 2021.”

Celebrates Opening of First Studio in Australia

7.  In mid-October 2020, CycleBar opened its first Australian location, in Perth. The new studio, located in Currambine, marks the first to open in Australia, expanding the reach of CycleBar’s parent company, boutique fitness curator Xponential Fitness, to four continents and nine countries, which also includes the United States, Canada, Japan, South Korea, Germany, Austria, Singapore, and Saudi Arabia.

8.  John Kersh, chief international development officer of Xponential Fitness, said, “Boutique cycling has been one of the hottest fitness trends in America for the past decade, if not longer, and we are excited for CycleBar to be on the forefront of that in Australia. The country’s strong demographics and vibrant fitness and wellness scene make it the perfect home for our high-energy, community-driven brand and an ideal market for rapid expansion over the next few years.”

9.  The expansion of CycleBar in Australia is being driven by a Master Franchise Agreement with husband and wife entrepreneurial team Matt and Candice Gordin, along with Matt’s father Bill Gordin from Perth. The Gordins have extensive experience in both the cycling and franchising world, with Matt holding the position of CEO and Candice leading the finance and accounting department for BikeExchange USA, a large marketplace for bicycle products, for close to 6 years.

10.  Both have a long history in franchising, with Candice as operations manager for Wild Cards & Gifts, a national gift shop franchise, and Matt as franchisee and general manager for Bike Force, an Australian bike retailer with 24 franchised locations. Bill Gordin founded Bike Force in 1991 and is also a seasoned competitive cyclist, with a gold medal at the World Masters Championship in 2018.

11.  The agreement with the Gordins will bring at least 45 CycleBar studios to the country over the next several years. Last month, they signed their first official franchise agreement with a local entrepreneur, which will extend CycleBar’s reach to New South Wales with three locations in Sydney.

Company History

12.  CycleBar was founded in 2004 by Bill Pryor and his sister Alex Klemmer in Boston, Massachusetts. Pryor and Klemmer saw how popular indoor cycling classes had become and they decided to start their own cycling studio that offered classes at a more affordable rate than other brands. Offering cheaper classes paid off and Pryor and Klemmer started to open more studios in the Boston area to keep up with demand.

13.  A decade later, in 2015, Pryor and Klemmer began franchising CycleBar and within the first 10 months of launching franchising, CycleBar had signed over 200 new studios. CycleBar expanded rapidly over the next few years and in 2017, the company was acquired by Xponential Fitness, owner of several boutique fitness brands including Club Pilates, StretchLab, Row House, Pure Barre, YogaSix, AKT, and STRIDE. Today, there are CycleBar locations all across the United States.

Entrepreneur’s Franchise 500

14.  CycleBar ranked No. 351 on Entrepreneur’s 2021 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 2021 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

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

2019

• Outlets at the Start of the Year:  152
• Outlets at the End of the Year:  193
• Net Change:  +41

2020

• Outlets at the Start of the Year:  193
• Outlets at the End of the Year:  208
• Net Change:  +15

Company-Owned

2018

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

2019

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

2020

• 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, 2021 FDD) and Analysis

• In the charts below in this Item 19, CycleBar discloses the average monthly Gross Sales generated in each calendar month comprising the 2020 calendar year as well as the first two calendar months of 2021 (each, a “Calendar Month”), by the franchised Studios that were open for at least 12 calendar months as of the start of that Calendar Month (collectively, this subset of Studios shall be referred to as the “Disclosed Studios”).

• For purposes of this Item 19, a Disclosed Studio will have had its soft opening and have been in operation for 11 months beyond that soft opening date to be part of the Applicable Subset for a given Calendar Month.

• In addition to disclosing the monthly Gross Sales information amongst all Disclosed Studios, this Item contains charts that breakdown the average Gross Sales for each Calendar Month comprising the 2020 calendar year, as well as the first two months of 2021 (the “Measurement Period”) amongst:

• (i) the franchised Disclosed Studios that were actively providing the Approved Services within their respective Studios throughout a given Calendar Month (the “Disclosed Studios with Active In-Studio Operations”); and

• (ii) the remaining Disclosed Studios in that same Calendar Month’s Applicable Subset that were forced to cease in-Studio operations for 1 or more days within that Calendar Month (the “Disclosed Studios with Interrupted In-Studio Operations”).

• All of the Disclosed Studios were operating as Franchised Businesses over the entirety of the Measurement Period.

• The financial performance representations contained in this Item 19 are historical representations based on past performance of the Disclosed Studios. The following representations are based on monthly profit and loss reports provided by the owner of the Disclosed Studios.

• The below charts in Item 19 exclude: (i) any Studio that was reacquired or otherwise owned by CycleBar at any point during the Measurement Period; and (ii) with regards to a given Calendar Month comprising the 2020 calendar year, any franchised Studio that did not have its soft opening and 11 months of operation as of the start of that Calendar Month.

• The Disclosed Studios sold these amounts. Your individual results may differ. There is no assurance that you’ll sell as much.

Part 1 – Average Gross Sales Amongst the Applicable Subset of All Disclosed Studios for Each Calendar Month Comprising the Measurement Period

• January 2020:  $42,306
• February 2020:  $41,519
• March 2020:  $29,331
• April 2020:  $9,168
• May 2020:  $11,313
• June 2020:  $18,445
• July 2020:  $20,638
• August 2020:  $21,120
• September 2020:  $23,138
• October 2020:  $24,587
• November 2020:  $28,362
• December 2020:  $23,028
• Total 2020:  $292,955

• January 2021:  $24,222
• February 2021:  $25,171

Part 2 – Average Gross Sales Reported by the Applicable Subset of Disclosed Studios with Active In-Studio Operations for Each Calendar Month Comprising the Measurement Period

• January 2020:  $42,306
• February 2020:  $41,519
• March 2020:  $0
• April 2020:  $0
• May 2020:  $17,845
• June 2020:  $23,257
• July 2020:  $24,867
• August 2020:  $25,063
• September 2020:  $24,775
• October 2020:  $25,904
• November 2020:  $31,678
• December 2020:  $26,653
• Total 2020:  $283,867

• January 2021:  $26,613
• February 2021:  $27,432
• Total March 2020-February 2021:  $254,087

Part 3 – Average Gross Sales Reported by the Applicable Subset of Disclosed Studios with Interrupted In-Studio Operations for Each Calendar Month Comprising the Measurement Period

• January 2020:  N/A
• February 2020:  N/A
• March 2020:  $29,525
• April 2020:  $9,228
• May 2020:  $8,288
• June 2020:  $8,912
• July 2020:  $11,781
• August 2020:  $12,876
• September 2020:  $13,376
• October 2020:  $11,167
• November 2020:  $14,056
• December 2020:  $8,994

• January 2021:  $9,615
• February 2021:  $11,351
• Total March 2020-February 2021:  $149,169

• The term “Gross Revenue” means the total revenue generated by a given Disclosed Studio over the Measurement Period, including all revenue generated from the sale and provision of any and all Approved Services at, from, or otherwise through, that Studio.

• “Gross Revenue” (i) excludes sales tax (that Studio owner must pay directly to the appropriate taxing authority), and (ii) does not account for revenue the Disclosed Studios may have generated by providing the Teacher Training Program.

• When reviewing this Item 19 and evaluating the franchise offering generally, it is particularly important to note the following characteristics of Existing Studios described in this Item 19 (as compared to a new Franchised Business):

• a. Each of the Disclosed Studios utilizes the Marks and System in a manner similar to how you will be required to use such intellectual property in the operation of the Franchised Business that is being offered under the Disclosure Document;

• b. Certain of the more mature Disclosed Studios did not incur the various other pre-opening costs and expenses over the Measurement Period that you are likely to incur in connection with the development of a new Franchised Business because such Disclosed Studios were all open and operating for some time as of the date the Measurement Period commenced; and

• c. Some aspects of certain Disclosed Studios are primarily managed on a day-to-day basis by a single individual that manages such matters for both locations. While this engagement would be similar to you engaging a “Designated Manager” or other third party to assist in managing certain aspects of your Franchised Business, CycleBar does not expect that you will be engaging such a third party at the outset of operating your new Franchised Business (unless you are a multi-unit owner).

• This Item 19 does not disclose or discuss any of the operating costs and expenses that will be incurred in connection with the establishment and ongoing operation of a Franchised Business, nor does it account for amortization, depreciation, tax liabilities, and/or costs associated with debt services (if and as applicable).

• The revenues and expenses of your business will be directly affected by many factors, such as:

• (a) your Designated Territory’s geographic location and population demographics;
• (b) advertising effectiveness based on market saturation;
• (c) whether you operate the business personally or hire a third party to serve as your Designated Manager;
• (d) your product and service pricing;
• (e) vendor prices on materials, supplies, and inventory;
• (f) personnel salaries and benefits (life and health insurance, etc.);
• (g) insurance costs;
• (h) weather conditions;
• (i) ability to generate customers;
• (j) customer loyalty;
• (k) employment conditions in the market; and
• (l) the efforts you and your personnel put into your Franchised Business.

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