I read the 182 page top-secret docs for F45 and here's what I learned...
Spoiler alert: these Aussies are smart as fuck.
My fav season is upon us - fall.
Back to rocking jeans + hoodies, not sweating my ass off every time I’m outside for .01 seconds, high octane pumpkin beer flows like wine, and beautiful women in UGS carrying a PSL instinctively flock like the salmon of the Capistrano.
Bonus points if you can name that movie quote.
As the 4th QTR approaches, I hope everyone is preparing for typically slower fitness sales and coming up with alternative plans for revenue.
Don’t worry, I’ll be publishing some advice on 4th QTR marketing plays soon. In the meantime, enjoy the read.
Much love,
Stu
Peloton Launches Its Own Private Label Athleisure Brand
Because how else will anyone know that you own a Peloton?
Peloton announced that they are expanding from equipment into clothing with a new label named Peloton Apparel, launched every season with new styles.
Peloton has dabbled in apparel since 2014, collaborating with big brands such as Lululemon, Nike, and most recently, Adidas. However, this is the company's first venture into designing its own private label clothing.
CEO John Foley boasts that while the platform has over 4.4 million subscribers - the community only exists while on the bike. He hopes that the Peloton tribe can now recognize fellow riders out in everyday life, further connecting their lifestyle brand to its members.
MY TAKE
Peloton arguably won the pandemic, fueled by its ability to create a communal fitness experience — right in your living room.
Their cult-like following generated a revenue of $1.8 billion in 2020, about double what it had done the year before, and it finally recorded its first profitable quarter.
And with its massive AF fan base, its expansion into private label clothing undoubtedly comes as no huge surprise.
Peloton is wise to capitalize on its status-hungry and devoted community by creating fitness apparel that its members can wear to sweat their ass off in a hardcore Peloton workout, then rush out the door to pick up the kids from school and rock around town to the local Whole Foods.
By creating their own private apparel label, they add an element of exclusivity- making current members yearn for the latest and greatest in seasonal apparel and turning them into walking billboards.
To create a tribe, you need to create uniforms.
Consistently producing high-quality apparel every quarter is a must.
Gorilla marketing via apparel is a widely untapped play for microgyms, but one where we should be playing.
How often have you been to a local hot spot and noticed someone in a branded tee from a local business? My bet is a fuck-ton.
It could be a snapback from their favorite brewery or hoodie from their microgym - whatever they're rocking, they do so purposely to let everyone else know, "I'm with them."
While the average microgym won't be able to private label their own athleisure line, you could certainly look into options like Rhone's, Hylete's, or Lululemon's strategic sales partnerships that would allow you to co-brand on their material.
Hell, even WTF has jumped in on the action with my DO WHAT YOU CAN’T merch collab with Few Will Hunt.
I know nothing about making apparel, but I do know what types of messages resonate with our joint audience - so I partnered with experts.
DIY or collab with a strategic partner, the choice is yours, but please don't let one of the strongest brand and marketing plays go by the wayside.
If you develop some dope new apparel, shoot me over a picture. I'd love to see what you create.
Is Sleep The Next Big Thing in Health And Fitness Tech?
Eight Sleep, their investors + Barry's seem to think so…
Eight Sleep, the sleep recovery company that quickly transitioned into the first-ever sleep fitness company, just raised $86M in Series C Funding.
Eight Sleep creates buzz about capturing zzz's with some pretty notable investors like Alex Rodriguez and Kevin Hart.
Their "smart mattress" called the Pod uses AI to monitor and regulate temperature to enhance the users' sleeping experience by allowing you to set specific temperatures for each side of the bed, monitor sleeping vitals, and their popular GentleRise feature that gently emits vibrations until you wake.
And with their fat new capital, they have big plans to continue to innovate in their software to detect health problems while you sleep and a new line of physical products like ambient lighting and sound machines.
MY TAKE
The fitness industry is littered with wearables like Whoop, FitBit, Apple Watch, and others that have turned gamifying health and wellness into a popular trend.
And while the tech mentioned above can help track HRV, heart rate, strain, and sleep - what are you actually doing to improve those metrics?
Sure, you're working out harder and taking rest days when suggested by your wearable - but how are you actually improving your sleep performance?
That is why I believe a company like Eight Sleep will revolutionize the fitness tech game.
Let's lay out the facts…
Fact: Sleep is a crucial element to an individual's health.
Fact: The global sleep market is still under-resourced.
Fact: While technology has solidified its purpose in fitness and wellness, tech is not being utilized in sleep fitness, which is where Eight Sleep has laid the groundwork to dominate the market.
Still more interesting for microgym owners might be the recent announcement that Eight Sleep has been named the official sleep fitness partner of Barry's Bootcamp.
While this cool collab will offer mutually beneficial exclusive pricing to both Barry's members and Eight Sleep users, what this news really forecasts is how sleep is now going to be a significant topic of conversation in fitness- honestly, just as much, if not more, than nutrition.
For the most part, quality of sleep conversations is something the fitness industry has left alone.
I bet when Sally is having an off day at the gym, you don't immediately think to ask her how many hours of REM sleep she got the night before... but even if you asked, what product solutions could you provide?
As we see products like smart mattresses and mattress covers advance the tech market, our cue as microgym owners should be to see sleep as another conversation with your members and identify ways to integrate your coaching and expertise into your customer's lives outside of the gym.
Top secret F45 documents leaked
I literally stole them from Mark Wahlberg’s gym bag…
So, they are not exactly top secret.
In fact, these docs are public information anyone with a Google machine can access.
As we discussed in a previous WTF Weekly, F45 recently filed for its IPO and had an impressive day closing out at $16.20 per share (total offering was 20.3 million shares...you do the math).
Yet what I was more interested in was the S-1 documentation.
To bring everyone up to speed, Form S-1 is the initial registration required by the SEC for companies before listing them on a public exchange, such as the New York Stock Exchange.
The S-1 provides the SEC and any potential stock investors with an in-depth look at its business, financials, potential market risks, and their future plans for cash earned from the public offering.
Now that the boring stuff is out of the way, here are the essential takeaways for any microgym owner curious what the fastest growing fitness franchise (ever) has going on under the hood.
Franchise Stuff
2,247 total franchises have been sold since the companies started franchising in 2014.
Last quarter alone, they sold 554 franchises. Holy shit.
Currently, 66% of them (1,487 studios) are open, with the rest in development.
Their global goal is 23,000 franchises.
For comparison, there are currently 32,000+ Starbucks globally.
Currently, their portfolio of single unit to multi-unit franchises is 49% to 51%.
This means more than half of studio owners see enough ROI to open additional locations or simply want to leverage brand awareness by having multiple locations in a market.
Revenue Stuff
Opening an F45 requires an initial capital investment of ~$315,000.
The average location, by year three, has an AUV of $354,000
AUV stands for Average Unit Volume and is the metric for current average annual sales that the concept is experiencing across all operating locations.
The average location can capture a 30%+ EBITDA margin and a cash-on-cash return of 33%+
EBITDA margin = operating profit
Cash-on-Cash return = rate of cash earned on the money invested into the franchise.
Previously, there was a flat $2,500 franchise fee due monthly. However, due to the success of their locations, they are switching to 7% of gross sales or $2,500 - whichever is greater.
Executive Team Stuff
The CEO of F45's salary in 2021 was just shy of $1.5 million.
He did take a 50% decrease during 2020 to ~$600k+. How thoughtful.
Mark Wahlberg owns ~26% of F45 in exchange for his promotional partnership. Nicely done, Marky Mark.
Operational Capacity Stuff
The average studio has a training area of ~1,600 sqft.
The class capacity of 36 means they are leveraging ~44 sq ft per member/per class. For comparison, here’s the average utilization from other models:
Yoga (~35 sq ft per member/per class).
HIIT (~50-75 sq ft per member/per class).
CrossFit (~125 sq ft per member/per class).
Programming Stuff
Each class is 45 minutes start-to-finish, allowing for a 15-minute buffer for sales and prospect intros.
F45 uses an algorithm to build unique workout cycles with an exercise library of 3,900 movements.
Their annual periodization consists of 4 x 10-week cycles and 1 x 12-week cycles.
They are currently developing two new programs - Prodigy and FS8.
Prodigy will allow studios to offer youth training (ages 11-18)
FS8 is a separate studio model that integrates yoga, pilates, and resistance training. Currently, 37 units are being tested in Australia.
Random Stuff
F45 has a contract with Soundtrack Your Brand to avoid the music license lawsuits concentrated on the fitness industry.
F45 does not own any of the real estate of their locations. No Ray Kroc methods here.
Studios that remained open during the pandemic only saw a ~13% drop in AUV.
For the microgym owner who snubs the big brands, claiming, "I don't want to be an F45, so why would I care about their business model?" I completely understand, and in fact, I'd prefer you don't learn from anyone else, ever, in the fitness industry.
Leave the industry improvement and desire to learn to the rest of us that are here to fuck shit up.
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