Orangetheory Fitness Co-Founder and CEO David Long discussed the brand's growth in a recent interview with Club Industry.
Orangetheory Fitness CEO David Long is a co-founder of Ultimate Fitness Group, which franchises Orangetheory Fitness clubs along with Massage Envy and European Wax Center. (Photo courtesy Orangetheory Fitness).
Orangetheory Fitness CEO David Long said his brand was nowhere near reaching its goals when the company opened its 200th location in April.
In a recent interview with Club Industry, Long expected that footprint to more than double with a projection of 500 to 550 clubs open and operating by the end of 2016. To put that number in perspective, Gold's Gym, which celebrates its 50th anniversary this year, has 541 clubs, and Planet Fitness, which started in 1992, has 976 clubs. Orangetheory Fitness started franchising in 2010.
"I believe in five years we're going to be the most notable fitness brand in the world based on our growth right now," Long said. "We're just excited to be growing in the fitness space. We're very aligned with our franchisee staffs and studios. People are enjoying what they're doing, and that leads to growth and profitability."
Founded in 2009 in Fort Lauderdale, Florida, as a single club owned by Ellen Latham, Orangetheory Fitness and its heart-rate based workout grew after Latham brought Long and Jerome Kern on board. Orangetheory grew to 26 clubs in 2012, 61 clubs in 2013 and 157 clubs at the end of 2014. Long projects 350 locations open by the end of this year.
"We finished 2014 with $8 million in revenue, and we are projecting $20 million to $25 million in revenue in 2015 – it's a lot of growth for us," Long said.
Orangetheory Fitness is not the first franchise associated with Long and Kern to show growth. The two are also co-founders of Ultimate Fitness Group, which franchises Orangetheory Fitness clubs along with Massage Envy and European Wax Center.
Massage Envy grew from 20 stores to 800 stores during Long's four years as the vice president of operations. Long and Kern together grew European Wax Center from five locations to 200 after forming Ultimate Fitness Group.
Orangetheory Fitness offers a brand of group personal training created by Latham, who is also a physiologist and the director and vice president of fitness for the company. The 60-minute sessions are broken into intervals of cardiovascular and strength training, and clubs provide members with wearable heart rate monitors.
Excess Post-Exercise Oxygen Consumption (EPOC) is the physiological theory behind the workout, which uses a variety of equipment, including treadmills, rowing machines, suspension training and free weights. The intervals are designed to produce between 12 and 20 minutes of training at 84 percent or higher of a member's maximum heart rate.
Orangetheory Fitness says participants burn 500 to 1,000 calories per session in conjunction with EPOC.
"We are very scientific with how we deliver, and it just gives us a great foundation," Long said. "When we have people coming through our doors two to three times a week, we need to guarantee results, and they will show up. The trend is that people are willing to spend more money than they wanted to in the past, but it has to be deliverable."
Orangetheory membership prices range from $50 to $150 per month depending on attendance. A 10-session package is sold at a higher rate than a monthly membership. Long said 90 percent to 95 percent of the memberships across Orangetheory Fitness are monthly because the monthly option delivers the best price per session and no long-term commitments.
Merchandise is sold in the orange-colored clubs, which typically occupy between 2,600 to 3,600 square feet.
Orangetheory Fitness' use of technology is not completely unique. XSport Fitness uses heart rate monitors in its X-IT class, and Life Time Fitness' free LT Connect smartphone app encourages heart rate-based workouts.
Orangetheory's Rapid Growth
Orangetheory Fitness' growth is visible in many of its 62 domestic markets.
One of the brand's largest markets is Houston, where the first club opened in 2013. Five locations are currently open, and there are plans for more expansion.
"The goal is that we're going to expand to 20 additional locations over three years," Jim Potesta, the Houston franchisee, told Club Industry, noting that the growth would come in about seven new clubs per year during that time.
Potesta described Houston as a diverse and recession-proof market with a booming economy supported by major industries. The traffic at the Houston clubs has been great, Potesta said, and members like the concept.
"The number one thing we hear from our members is that 'we don't have to think about it, we just show up and they tell us what we need,'" Potesta said.
Long foresees a footprint of 30 to 40 locations in Houston, similar to the company's more mature markets in South Florida, Tampa Bay, Colorado and Arizona. He said California and Illinois (Chicago) are growing, but a 'real estate hunt' is slowing growth in those markets.
California grew from four locations to 15 between 2013 and 2014, and the Orangetheory Fitness website lists 35 clubs as open or in development there. The Chicago area grew from two clubs to six between 2013 and 2014, and the website lists 35 Chicago-area clubs open or in development.
The company is developing the brand across the country simultaneously, and Long expects the first Hawaii club will open within the next two to three months. Locations are also in the works in outlier markets in North Dakota, South Dakota and Alaska.
"We are going to saturate the U.S., and then we're going to continue to build out internationally," Long said. "We believe that we will get to 150 open (internationally) by the end of 2016. We've got a core team that focuses on domestic markets, and another team that focuses on international markets."
Orangetheory operates close to 50 locations in seven international markets in Canada, England, Australia and Columbia.
The total investment necessary to begin operating an Orangetheory club ranges from $437,600 to $772,000, according to Orangetheory's most recent Franchise Disclosure Document (FDD). The cost of fitness equipment and the proprietary OT Beat System used for heart-rate monitoring ranges between $110,000 and $130,000, depending on club size.
Locations in operation for at least two years at the end of 2014 averaged $908,694 in revenue and averaged 848 active members. One in four clubs beat the revenue average, according to the FDD.
"Our goal is for our franchisees to do a million in annual revenue at their location," Long said.
As Orangetheory Fitness continues to expand, Long said the company places a priority on maintaining brand quality and integrity at each location. He also said the brand is developing products for members to train outside of the studio environment.
"We have some really exciting things coming in technology with apps and hardware," Long said. "We know most of our members will come in two to three times a week. We want to give them the tools to use when they are not in the other four days. It's a bigger brand goal – to empower our customers to do a lot more with the knowledge and tools we can give to them."