The boutique fitness space makes up a small piece of the overall fitness sector. But a recent grouping of deals involved in the space hints at potential PE interest.

In January, Princeton Equity Group took a minority stake in Barry’s Bootcamp, a boutique fitness studio chain. And in September, L Catterton acquired Solidcore, a fitness studio operator.

To learn more about PE’s interest in these boutiques and what’s going on in the overall fitness space, PE Hub caught up with Marc Magliacano, a managing partner at L Catterton; James Waskovich, co-founder and a managing partner at Princeton Equity Group; and John Bastian, a director in Baird’s global consumer investment banking group.

Founded in 1998, Barry’s is headquartered in Miami and operates 89 studios worldwide. Barry’s focuses on high-intensity interval training with running, lifting and training classes.

Waskovich said the plan for Barry’s is to open a number of additional locations. “The company has a robust development pipeline of new locations,” he added. “Our plan is to open new locations, not just in the US, but globally.”

Founded in 2013, Solidcore is headquartered in Rosslyn, Virginia. The chain of studios offers a high-intensity, low-impact, full-body workout. “Solidcore is a proven concept,” Magliacano told PE Hub. “There are 130-plus studios in all markets around the country, but importantly, it’s hitting on this massive trend in strength [for women]. It’s low impact, it’s high sweat, while being strength-oriented.”

All about retention

There were 50-plus global M&A deals in multi-fitness the past year, with three of those deals involving boutique fitness. Magliacano said the right studio fitness companies have all the essentials of becoming a high-quality investment. They have good return on investment, good customer retention and lifetime value.

They have all the right metrics to make an investment a success. But it isn’t just about the math.

“It is about creating emotional and community connectivity with their members,” Magliacano added. When you drive loyalty, you can drive price. And therefore revenue per member and lifetime value.”

The sense of community is a significant part of the equation. It keeps customers coming back. Waskovich told PE Hub almost half of Barry’s revenue comes from customers that have been using the service for five or more years.

One of the attractive reasons for a boutique fitness set-up rather than a traditional big-box gym is unit economics, Waskovich said. A very large fitness facility can be around 50,000 square feet and has a significant amount of capital expenditure. Then there’s a significant price for buying equipment in the gym, which can go unused all day.

“Boutique fitness is really attractive, and it’s been one of the big growth areas in fitness because I don’t necessarily need 50,000 square feet,” Waskovich added. “Many boutique fitness concepts do really well in 3,000-5,000 square feet. Build-out is way less than a big-box gym, rent is way less, yet the class-based workout in many respects is dramatically more effective for our athlete or guest.”

Challenges in boutique fitness

Though there is interest in boutique fitness, there are some challenges. Bastian says part of the reason for the lack of M&A activity in boutique fitness has been because it’s been one of the more disrupted sub-segments in the fitness industry.

Boutique fitness classes have usually been concentrated around 8 am and 5 pm, around consumers’ commuting times to and from work. Many locations were built near consumers’ offices. The pandemic has changed that.

“[Due to the pandemic] a lot of people have moved, a lot of people have migrated and they’re just not seeing the traffic that you might expect,” he added. “Some broad brands have not reached pre-pandemic traffic levels as users’ interests have changed to different types of modalities.”

Magliacano said the challenge with investing in boutique fitness is, like most things in life, that doing the same thing over and over again can become routine and less exciting. That can lead to diminishing return on results.

“The studios and the concepts that have struggled over time are the ones that failed to evolve with both fitness trends as well as mixing up the execution in a way where people can continue to both have fun and get results,” Magliacano added. “As an investor you want to make sure that your concept doesn’t lose its relevancy. The secret sauce with respect to studio success is continuing to be on your front foot as fitness trends and desires continue to evolve at the consumer level.”

Bastian said that the boutique fitness space will continue to have success with PE, but he added that “brands will have to really prove that their experience, and their community, is sustainable. When you can build the highly loyal and engaged brands within boutique fitness, it’s a fantastic place to play fitness.”

One tweak that he says boutique fitness gyms might be looking at to improve business is reducing specialization. They could offer classes that offer different types of modalities so that the business is not so exposed to consumer fatigue with the same exercises.