Yahoo Finance 'It's unfathomable': Fitness companies describe how coronavirus derailed the booming industry
This story has been updated with new details from fitness companies.
The COVID-19 outbreak has taken the world by storm: As of April 1, there are over 850,000 cases worldwide and nearly 190,000 in the U.S., which has become the global leader in the number of cases.
Boutique fitness studios and fitness franchises across the U.S. are among the industries feeling the financial blow from the coronavirus.
In 2018, global health club industry revenue totaled $94 billion, according to the 2019 International Health, Racquet, & Sportsclub Association Global Report, with over 210,000 clubs serving 183 million members.
“The industry is on pace with IHRSA’s global initiative, announced last year, to reach 230 million health club members worldwide by 2030,” Jay Ablondi, IHRSA’s executive vice president of global products, said.
That estimate is bound to change now that the coronavirus pandemic continues to spread rapidly across the world.
Thousands of facilities have been forced to closed their doors indefinitely until the government officially allows these businesses to open their doors again — and that likely won’t happen until at least May.
That means that thousands of fitness instructors and employees across the nation are currently without pay and without a job. Yahoo Finance reached out to eight leading fitness companies to see how they were handling the ongoing crisis:
Solidcore
Solidcore, an intensified pilates-based class with 72 locations nationwide, announced on March 17 that it would be laying off 98% of its workforce due to COVID-19.
According to Anne Mahlum, its founder and CEO, all of the employees will have their health benefits paid through the end of April and receive a $350 stipend. She was able to keep 13 people on the Solidcore team, who will have salary cuts of more than 50%. Meanwhile, Mahlum will not be taking any salary at all and will not until her company is able to recover from this shutdown.
“It’s pretty amazing seeing the support that we still have from employees and people that we had to lay off, they just keep asking what they can do,” she told Yahoo Finance. “You don’t grow to 72 locations in six years if you don’t have a successful product. When your company overnight is forced to close every studio down, you go from generating sales and revenue to zero.”
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According to Mahlum, the company was on track to have its best month ever in the first half of March. She stressed that the company has never missed a payroll, a rent payment, or a utility bill.
“We don't write budgets of thinking someday we'll just not have any money coming in,” she said. “It's unfathomable, and as the restrictions put in place and as we're sitting here today still, there is no set timeline.”
Solidcore employees were made aware of the layoffs via a Zoom video call prior to the company’s formal media press release.
“It was heartbreaking,” Danii Zip, an instructor at Solidcore Nolita in New York City, told Yahoo Finance. “Not just to lose a job but to see how much [Anne] cares about us.”
She had recently joined the team on March 6, and was one of the hundreds of fitness instructors laid off.
“There are way too many variables in terms of how long this goes on,” Zip said. “I know the layoff for us was that in hopes we do re-open, everyone has a job to go back to. It’s not going to be perfect and I think everyone is aware of that, there’s going to be an adjustment period.”
PRX
PRX, a boutique fitness facility with locations both in New York and New Jersey, had to close its doors formally to the public due to the New Jersey state mandate on March 16. The first thing PRX Studios did following studio closure was to freeze all of its member’s accounts.
Cliff Randall, co-owner of the facility, is without pay along with his fellow instructors and employees.
“We were preparing for it,” Randall told Yahoo Finance. “We wanted to keep our members safe. We knew this was something out of our control. I always tell my members that this is your facility, you just pay me to maintain it. Since you pay for this place, this place belongs to you, so treat it as if it’s yours.”
“[For] my staff,” he added, “the last two weeks have been challenging for them because they rely on this check.”
Despite the difficulties PRX is facing, Randall said the business has released free at-home video workouts to keep members’ spirits high.
“For me, it's like, what could I do to keep members and staff positive in this time?” he said. “I’m weathering the storm. There’s not much I can do about anything except be patient.”
Shadowbox
Shadowbox, a boxing gym located in both New York City and Chicago, has gone LIVE on its Instagram page with full-body workouts spanning between 30-60 minutes.
“It allows us to put our instructors kind of in a new medium but continuing to work and be compensated for that work,” Kevin Kelleher, operating partner for Shadowbox, told Yahoo Finance.
Since closing its doors at its two New York City locations and its most recently opened Chicago location, Shadowbox’s revenue sank to zero, the company shared.
“This is kind of an unprecedented time for our company, in terms of just the economic climate, as well as, obviously, going through a public health pandemic,” Kelleher said.
As one way to help support the employees, gift card packages are available on the website in exchange for “studio class credits,” which will be used once the studio is able to reopen. And, Kelleher said, the business has received “an outpouring” of donations for its employees.
”The kind of the outpouring of support from our community has been really empowering and humbling and has made a time that is incredibly challenging and scary for all of us — not just the fitness community, at least added a little bit of a bright spot to an otherwise pretty uncertain time,” he said.
AARMY
AARMY, a “revolutionary coaching experience” located in both New York City and Los Angeles, has also been feeling the challenge of generating income since closing its doors.
“This is our first year out of the gate and well, this is obviously quite a challenge to have in year one,” Trey Laird, co-Founder and CEO, told Yahoo Finance.
AARMY has been going LIVE on Instagram to bring high-intensity workouts, cycling classes, and motivational conversations to anyone who wishes to participate. It is one of the few fitness studios that has made the decision to continue paying its 10 employees while the studio remains closed to the public.
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“For right now, it's super important to continue having our teams stay together and intact,” Laird said. “We just made the decision to continue paying our team and but we did see revenue go to absolute zero immediately like so many other people did.”
He added: “What was so incredible is so many people in our community that are so loyal to us and love AARMY so much had been reaching out saying, ‘Hey, can we support you guys? Can we Venmo you? Do you want to start a GoFundMe? How can we help?’”
AARMY has since created a new class series pack called “AARMY Unlimited.” Customers are able to purchase as many of these packs as they want in $50 increments. The brand has stated they will be “donating 10% of all these pack sales to the World Health Organization,” as well as using the money to help support their business.
Barry’s Bootcamp
Barry’s Bootcamp officially closed all of its studio locations across the United States, Canada and France on March 15.
According to CEO Joey Gonzalez, the priorities have been communication and connectedness.
“I have hosted calls with different subsets of our employee base just to walk through our two-week plan,” he told Yahoo Finance. “And when I say two-week plan, that's the only way through this for us because we can't really go build strategy beyond two weeks because every single day we wake up, information and circumstances have changed. So we're doing our best to continue paying as many employees as possible for as long as we can.”
In the meantime, Barry’s Bootcamp has been offering free workouts via its Instagram profile.
ClassPass
ClassPass announced that it will “enable fitness and wellness partners to offer live-streamed classes through the ClassPass app and website.”
Additionally, the company said that through June 1, 2020, “100% of the proceeds will go directly to the studios and fitness instructors who are unable to host in-person classes due to COVID-19.”
ClassPass has also created a Partner Relief Fund, which allows members a way to donate money to studios directly through the app. It will be matching all studio contributions up to $1 million.
“The entire fitness industry is at risk,” ClassPass CEO Fritz Lanman told Yahoo Finance. “There has never been a situation where so many studios have closed their doors overnight. In place of encouraging words that won’t help our partners to pay their teams and their rent, we are putting our resources and time behind concrete actions that will help partners to quickly monetize digital classes and get fast financial support.”
Lanman shared that ClassPass has launched video classes from partner studios. He also called on the government to take action and help the fitness industry during this time.
“We need governments to provide a strong response to ensure the survival of these businesses,” he said. “90% of our partner studios have indefinitely closed their doors in the past two weeks, and many have already started to lay off their teams. It’s imperative that we act now to save these businesses that are such an important part of keeping our communities healthy.”
ClassPass has launched a petition in light of COVID-19, signed by more than 40 prominent fitness CEOs, asking the government for rent relief, stating that “without a policy intervention, the inflexibility of private landlords will drive many businesses to close permanently.”
The petition also asked for financial assistance to support the workforce, shedding light that “thousands of fitness instructors, front desk staff, cleaning teams and venue managers are without work.”
Xponential Fitness
Xponential Fitness, a company that owns fitness franchises such as Club Pilates, CycleBar, StretchLab, Row House, Pure Barre, YogaSix, AKT, and STRIDE, has been advertising gift card purchases on its websites to directly support local studios and its employees.
“You're basically fronting them with revenue,” Founder and CEO Anthony Geisler told Yahoo Finance. “This allows them to have money to continue to operate, to pay their employees, to pay the rent, or their bills so that they'll be able to reopen when this is over.”
The company’s brands were able to switch immediately to digital, offering fitness classes to people at home. The instructors are paid the same as if they were teaching a class in person.
“If they're a current paying member at StretchLabs, they're getting access to all eight brands' content,” Geisler said. “So you could be a paying CycleBar member, and now all of a sudden you have access to Pure Barre and Club Pilates and yoga and stretching and everything,”
Geisler shared that CycleBar studios are now offering members to rent bikes and take them home to use, as well as rowers from Row House studios. Pilates classes that would typically have individuals use a reformer have now become mat-based classes.
Although the consumers of the Xponential Fitness brands now have access to multiple fitness classes, the individually franchised owned and operated studios are still ultimately responsible for how they are able to support their instructors and employees during this time.
“It really has become a choice of the independent franchisee,” Geisler said. “And what our job is as a franchisor is to basically support them through any of those processes.”
He continued: “If you're a franchisee in New York right now, that's a different situation than if you're somebody that is in the middle part of America or something where there may be no deaths, or there may be only X amount of infected.”
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Once the coronavirus outbreak subsides and people are able to come out of self-quarantine, Geisler said that health and wellness might be massive keys of focus.
“I can be biased, that as we come out of this, people are going to have a renewed vigor to be out doing things when they can when it's proper to do so,” Geisler said. ”We’re trying to keep our heads up and keep a positive attitude. We believe this is going to end. I think everybody's in agreement that we will come out of this.”
Orangetheory
For the Orangetheory franchise, not all employee and instructor jobs at studios across the United States are secured.
“It's been a really tough couple of weeks for us,” Orangetheory CEO Dave Long told Yahoo Finance’s On the Move. “At headquarters here, we own locations as well, and we have had to reduce that workforce significantly.”
In an email sent by David Carney, Orangetheory president, corporate employed Orangetheory workers and instructors were fired from their studio jobs effectively as of March 21.
“At this time, you should consider this layoff to be permanent,” the email said. “Though OTF Studios, LLC will attempt to resume operations as quickly as possible when it is safe to do so and when economic conditions permit, we do not have any current plans to re-hire the employees who are to be included in this reduction of our workforce. If the situation changes, and we regain our position to re-hire the employees included in this reduction, we may reach out to you.”
“The email felt so cold,” said an Orangetheory employee, who wished to remain anonymous due to fear of losing the opportunity to be re-hired by the company. “That’s all we got. They did even choose to furlough us which would have been nice.”
Long explained that within the Orangetheory company, their franchisees owners that have had to “make tough choices from either going to a reduced workforce to eliminating the workforce temporarily so they can preserve cash to reopen their studios at the right time.”
Aside from trying to keep the various Orangetheory locations afloat, trouble with negotiating rent with landlords during this time has also been particularly challenging among fitness studios who currently have no profit generating during this time.
“We put forth a set of best practices, asking for landlords to even just defer rent for later in the lease term, or add to a lease term where we're willing to actually extend our lease term for that trade-off,” Long said. “Many of the landlords have leaned in to really work with us knowing where a very high quality tenant, we've never closed a location in North America. And so we're the type of tenant that hopefully, they want to have with on the other side for many years.”
Long told Yahoo Finance that it’s at the discretion of the franchisee to close studios, which are all closed at this time in the U.S.
But internationally, some studios have begun to reopen. Long shared that they have also closed all corporate-owned studios and are urging franchisees to uphold all guidelines from local health officials, the CDC and the WHO.
When it does come time to safely re-open studios, both domestically and internationally, Long said that it is also at the discretion of the franchisees, based on local health guidelines.
Equinox
Larger gym companies such as Equinox have closed club locations and showrooms effective as of March 16. All memberships have been put on a freeze at no cost, and the expiration dates of any unused packages and gift cards have been extended.
In a statement to Yahoo Finance, an Equinox spokesperson confirmed that the company has had to make a number of adjustments as they combat the COVID-19 crisis.
“Equinox has had to make a number of difficult decisions that impact individual roles and payroll at all levels of the organization, including implementing pay reductions and furloughs for employees unable to work due to club closures," the statement read.
"Our people are at the core of everything we do, and through these actions, we are able to continue to compensate the majority of our workforce with as minimal a reduction in pay as possible, while continuing to provide health benefits and access to mental health services to all employees enrolled."
A source close to the decisions at Equinox confirmed that the majority of employees will be at 75% of their wages.
Equinox also made the decision to furlough certain employees, “given their eligibility for enhanced benefits recently passed by the federal government.”
Equinox has so far has offered two free Instagram LIVE classes, one being yoga and the other a guided meditation.
The company also debuted Variis, where Equinox, SoulCycle, HeadStrong, Precision Run, Pure Yoga, and Myodetox classes can be taken on demand via an app. Since its launch, it’s also posted workouts to the Variis Instagram IGTV that consumers can participate in for free.
According to an Equinox trainer, who wished to remain anonymous, employees still have not received a paycheck.
“I believe it's going to be typically half of the pay of which you typically generate,” the trainer said. “That's what you'll end up getting. But I think that's only going to be like a one-time thing. So it's not going to be throughout the course of this COVID-19 pandemic. So if we do get paid, it's going to be just that one time and that'll be until further notice, unfortunately.”
According to the Equinox trainer, the company insinuated that employees would still have job security upon the reopening of the fitness facilities.
“We were told that once everything does die down, that pretty much whoever was part of the team will still be part of the team,” the trainer said.
Peloton
Peloton (PTON), where instructors are used to teaching to not only live, packed rooms, but also to millions at home with access to their app or fitness equipment, have since closed its doors to the public from joining its in-person studio classes.
The company has also changed its home delivery service for customers who have recently ordered a bike. The bikes will be fully assembled but will be left at the customer’s home entrance. In addition, Tread sales and deliveries are at a pause.
And, Peloton also stated that “in order to limit interpersonal contact, we have also postponed any service appointments or returns that require our delivery teams to enter a residence beyond the threshold.”
Peloton denied the request for comment regarding any COVID-19 related press.
Olivia is a social media editor for Yahoo Finance.
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