What’s Orangetheory’s USP?
Our business is an intersection of technology and human interaction. We have amazing humans in our studios – our expert coaches and our supportive communities – which means members crave and commit to the in-person experience. But we also leverage science and technology to bring about incredible results for our members.
There’s so much behind the design of the Orangetheory workout, and behind the technology that connects and brings it to life. Many people use wearables, but those wearables don’t know if you’re on a rower or a treadmill. Our technology does and it provides second-by-second data for every single workout so our members get ultra-accurate feedback on their performance and our coaches use that data to deliver exceptional coaching and drive results for members. That’s super important.
I’m asked all the time how it is we’ve grown so fast and I point to the results our members achieve. People work out for a reason. The primarily feedback is currently cardiovascular output, tracking improvements in distance covered on the treadmill, power output on the rower and so on, plus we have pretty accurate body composition scales in our studios.
Moving forward, we’re planning to connect our strength equipment too, so we can also report on strength improvements.
How has the company grown?
Founded in 2010, we’d grown to 1,000 locations by 2018. We’re now at around 1,540 locations across 23 countries; growth obviously slowed in the pandemic. However, we continued to open studios even during those years.
We’re the first boutique that really went to scale and now we’re merging with Self Esteem Brands, owner of Anytime Fitness, to form a US$3.5bn business.
How do you feel about the merger?
None of us can talk much about it until the deal has gone through, but We’re excited about what our combined companies will be able to accomplish together to capture market share, unlock growth and pioneer a healthier tomorrow for consumers around the world.
As we start this new chapter, the company will continue to build on its legacy of innovation and transformation. (More: www.HCMmag.com/OSEB.)
Tell us about your programming
Our original Orange 60 workout is heart rate-based interval training: a total-body group workout using treadmills, rowing machines and weights, where you aim to get into the anaerobic zone for at least 12 minutes of the 60-minute class. That means hitting 84 per cent of your maximum heart rate, which is initially calculated based on your age, but ultimately based on your in-studio performance. I believe it to be world-best programming.
Since we launched Orange 60 has been the only programme we’ve offered, which made 2023 really special for us because we launched a second programme globally, called Strength 50.
Our core programming already had plenty of focus on strength, but our members were asking for even more, so we built and tested a product over three years and launched it last September. It’s now virtually booked out at all studios and what we’re seeing is that members are doing it as well as the Orange 60 classes they were already doing. They’re not trading out any classes: they’re doing more.
We don’t coach to heart rate zones in Strength 50: we coach to specific strength outputs and look at progression and form. However, our members still wear their heart rate monitors and we do track heart rate, and on leg day especially, members might still get what we call Splat Points: one point per minute spent in the anaerobic training zones.
Will there be more new programmes?
We launched a third class globally – Tread 50 – in January. There’s another segment of our members who want more endurance training, more cardio, whether that’s for fat burn or cardiorespiratory fitness or training for a 10k. We tested the programme throughout Q4 and it got a higher NPS (Net Promoter Score) than anything we’ve ever launched, although we recognise the bias of members already wanting and therefore loving it!
With a trio of options, members are now able to customise their weekly routines around their specific goals, which we know will add tremendous value. They might already be 70, 80, 90 per cent of the way there, and some people might not want to change a thing, but for others, adding new classes offers the chance to get even greater results.
Average workouts per member is currently almost spot-on where it was pre-pandemic, with most members attending two to three classes a week – we expect that figure to rise even further with the addition of our new programmes, while our NPS is higher than it’s ever been.
Our next step will be to look at how we continue to personalise the experience, not only in-club with our coaches and the events we run, but also through our mobile app. You can already set and track goals, but later in 2024 we’ll introduce recommendations – the class types you should take – with signposting to the relevant studios and coaches. It’s about simplifying the programming for members based on the goals they’ve given us.
Who are your customers?
One of the common misconceptions of HIIT is that it’s only for fit people. In fact, empowered by our coaches and our heart rate monitoring, Orangetheory workouts completely cater to every individual.
Our typical customer is around 40, a college educated graduate, generally female – around 65-75 per cent of our customers are women – with one or two kids. But overall it’s a broad spread, from people in their 20s through to a few in their 60s+, which speaks to how our onboarding equips people to be successful, regardless of fitness level and experience.
Rather than immediately setting workout targets, our new customer roadmap focuses on making them feel comfortable: we get them used to the equipment, the heart rate monitoring, the cues. And although regulars still get corrections and support, our coaches spend the majority of their time in class with newcomers, who also receive onboarding emails and a coach-led debrief at the end of class. It ramps up really nicely and sets people up for success.
I think there’s probably still work for us to do around our messaging, making it even clearer that we cater for all levels so we appeal to more people. But once people come in, our conversion rate is high and referrals are strong. Members are also loyal, even with membership packages that are month-by-month in most markets. People stay for the results, not because of contracts.
Most members stay with us more than a year first time around, but the unique thing about our brand is that people leave and come back frequently; we don’t penalise that by charging additional enrolment fees. A quarter to a third of people who leave come back a second time and typically stay 50 per cent longer than they did the first time. Some come back a third time.
You recently changed strategy in the UK…
Our goal for Orangetheory Fitness is for our franchisees to operate the studios; we’re happy to acknowledge that they’re better at this than we are! What we focus on is advancing the product, technology and marketing, creating an amazing franchise system and support model.
Particularly in overseas markets, local knowledge is really important. We’ve learned and continue to develop the muscle of how to maintain the core of our brand so it works outside the US, but we would never pretend to have the level of expertise required to locally nuance the offering.
With this in mind, in November we announced the sale of our four London studios, that had previously been corporately owned, to Digme Fitness. Digme is a new franchise partner, with Orangetheory’s London expansion now being led by Dan Williams – previously co-founder of WIT Fitness – who has joined the business alongside Digme CEO Geoff Bamber.
We’re really excited to bring them on as our London franchisee. They’re highly motivated, really believe in the product and already have the skillset needed to run successful studios. They’ve got a lot of horsepower behind them.
At this point, the plan is for them to own and operate, although the flexibility is there to bring on other franchisees within the territory if a fantastic partner comes along who wants to do a cluster.
What are your plans for the UK and Europe?
We have massive expectations for the development of Orangetheory Fitness in Europe and the UK.
We’re bullish about London. We’re saying four more studios by the end of 2025, but that’s a conservative estimate which gives our new franchise partner time to understand the model and drive performance at the existing locations. I’d say two more studios next year is realistic and likely more than two in 2025.
Outside London, we’re aiming for 16 sites by the end of 2026: some in the north of England, where we already have a few locations and some just outside the M25.
In mainland Europe, Spain is set to be our big growth market for 2024. We had a really good year there in 2023, with tremendous membership growth, and the flagship that opened there in 2022 has grown to be a very successful location. There are plans for five more clubs in Spain in 2024: in Barcelona, Madrid and one other new city.
We have locations in Poland and Denmark and a few other markets and all are performing decently, but for 2024 our European growth will really be focused on Spain and the UK.
Tell us about your flagship studios.
For us, a flagship isn’t about creating something unscalable just for the sake of marketing, where it’s treble the expense to open and impossible to make profitable. It isn’t pie-in-the-sky stuff: we want franchisees to look at our flagships and think ‘I could open that and be profitable’.
In Madrid, for example, our flagship includes an on-site training facility and meeting spaces, but the studio itself is only just slightly bigger than the norm for Spain. We have a great flagship in New York City, too, on the corner of Lexington and 58th Street. So they all have fantastic locations, but in every case, we want them to be model studios – showcases of profitability and operational excellence.
We’re eyeing two or three European cities to open flagships in 2024 or early 2025, with existing and potential new partners. For these sites, we might consider joint venturing, as they will drive brand visibility in Europe.
What are your growth plans?
Our international markets are generally 12–18 months behind the US in terms of fully recovering from COVID.
Canada, for example, had a tough time. They weren’t really fully clear to be open until mid-2022, and in 2023 they opened just a handful of units. They’ve had good success with Strength 50, but 2024 will be the first year of getting back to driving growth, with eight to 10 new locations already planned.
Latin America does well, with one key partner who’s going to open five to seven new units in 2024.
The other rapid growth market will be Japan. Had the pandemic not hit, Japan would probably be at 100 locations today. As it is, they’re at 14, but they’ve really figured out the localisation of the model and have an extremely strong fan base. We won’t open lots of new studios there in 2024, but it will be a set-up year for really rapid growth from 2025. This is a market that could get to hundreds of units.
Meanwhile, we’re aiming for about 75 new locations in the US in 2024, which still isn’t quite back to the volumes we achieved historically. We’re very much about quality over quantity, though. We could have a lot more stores in the US, but it wouldn’t necessarily benefit our franchisees or our brand. Having a profitable franchisee means a great experience for the member and that’s been our mantra from day one.
We always look for convenient locations in great areas that are spaced just far enough apart. We aren’t looking for crazy high volumes of storefronts, and I think that’s important to recognise. For all markets globally, we’d rather have fewer studios that are very successful and servicing our customers really well.
Any other exciting plans?
We’ve always had digital workouts on our app – strength, yoga, recovery – but in lockdown, we wanted to do something different from everything else out there. We built a product called Orangetheory Live: a digital interface where the coach can see all the members and their heart rates on-screen. We still have tens of thousands of members using it, but we haven’t marketed or scaled it because members returned to our studios as soon as they reopened.
There are, however, other things we might do with that platform down the road. I already mentioned adding more personalisation in the app, but we might also offer human-facing personalisation via our digital platform, using it as a coach console for convenient virtual calls to go through your performance, heart rate and so on.
Should we engage with a nutrition provider, this platform could be a gateway for that as well; we still aren’t directly doing anything with nutrition, even though it’s a critical part of getting results.
The other exciting opportunity, thanks to all the data we gather to showcase results for members, is to expand our presence in the healthcare market.
Over the years, we’ve worked closely with the American Heart Association and the CDC to monitor people’s improvement in cardiovascular output, and how that correlates with meeting the CDC’s guidelines for physical activity, and we already have some unique partnerships with healthcare providers, primarily in the US for now.
At present, there are two healthcare providers who will fully pay for Orangetheory memberships for their customers. They recognise the value we provide in getting those people healthier. Their productivity, their mental health, their healthcare costs… everything is so much better over time by staying consistent with a programme like ours.
Our big goal now is to work with more partners, getting Orangetheory subsidised or fully paid for by even more healthcare providers.
What are your challenges?
There are no deal-breakers, but we haven’t seen the improvements in economics and rents we’d hoped for in a lot of markets. The situation with lending also means there’s a point beyond which it’s harder to get funding.
We’ve therefore been optimising our studio footprint and set-up costs. When we first started out in 2010, we typically looked for 200sq m for a studio. As we grew and studios got busier, they organically got bigger, often 300+sq m. Now our prototype is back where we started, at 200sq m, which means our start-up cost is 30–40 per cent lower now. In the UK, for example, the total initial investment required to begin operating an Orangetheory franchise starts at £415k.
Meanwhile labour costs are rising, which has challenged us to look at our model. We’ve always paid our coaches well and this has allowed us to continue running our standard model throughout everything that’s happened in recent years. However, we’ve reviewed our front-of-house operations and automated what we can at an administrative level – including empowering members to do more via the app – so the front-of-house role that remains is all about engagement. That makes it easier to recruit and also means we need fewer people: we’ve been able to go down from three to two or even one per studio.
There are obviously things we can’t control, but of those we can, we’re working hard to optimise what we do without negatively impacting the experience.
What are your long-term growth goals?
The lion’s share of our locations are currently in the US, with only around 200 outside our domestic market: around 100 in Canada and 100 rest-of-world. The exciting question is: where’s the tipping point where we’re bigger internationally than we are domestically?
We think parity is around five to seven years away, when we reach around 3,500-4,000 locations, and that 10-20 years down the road, the international markets will be three to five times the size of the US. At that point, you’re talking 10,000 global units, which I think is realistic. It’s going to take a long time – a decade or more – but that’s the long-term goal.
What continues to motivate you?
Fitness and wellness have always been at the heart of my passion and purpose, so I’m very excited about the things we’re going to do with the Orangetheory Fitness product itself to make it even better and more personalised.
I’m also excited about international expansion, because that’s a decades-long project with so much we can do year after year. And I’m excited about the potential to impact more people through healthcare partnerships, by removing cost as a barrier to participation. That really is a win-win, as it will also accelerate growth for us.
Last but not least, I’ve grown a massive affinity for franchising. It’s exciting to be able to provide the platform and toolkit for people to have a successful business.
The success rate of franchise businesses is high compared to trying to do it on your own, but there are so many profitable options to choose from, all with great systems. Our secret weapon, I think, is that with Orangetheory it’s more than just a business decision. People choose us because they love the brand, love what it does for members and want to be part of it. We’re building on those incredibly strong foundations, and even though it’s been 14 years, it feels as though we’re just getting started.
