Orangetheory Fitness is changing the way people think about exercise and well-being. NCMM Managing Director Doug Farren speaks with Founder Ellen Latham on how this middle market company is changing the fitness world.
Transcription
Orangetheory Fitness is changing the way people think about fitness and well-being. Come find out how they're doing it.
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Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid-sized companies. And help you take advantage of new opportunities.
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Welcome to The Market That Moves America. I'm Doug Farren, managing director of the National Center for the Middle Market. Joining me today is Ellen Latham from Orangetheory Fitness. Welcome to the podcast, Ellen.
Thank you so much.
So we are very excited to learn about Orangetheory Fitness, one of the probably fastest growing fitness companies in the United States middle market business, which we've featured on our company of the month feature with the NCMM. So I would like to start, Ellen-- could you tell us just a little bit about the history of Orangetheory? How it was founded? Maybe some of your early success in those first years.
Absolutely. So I've been in the fitness industry for over 40 years. Literally from the Jane Fonda leg warmer days. So I've been doing fitness for a long time. And about 15 years ago, I went off and hung my own shingle and opened up a Pilates studio.
And it was a very successful Pilates studio-- and this was before the studio concept really took off. I was kind of one of the first studios, if you go back 15, 16 years, you didn't hear much about fitness studios. And this Pilates studio was very successful. Except there was a problem with it.
There's no metabolic work to Pilates. So when I speak of metabolic work, I'm talking about fat burning work. So my members were working with personal trainers, they were taking spinning classes, they were jogging, and they still weren't getting the ultimate results they wanted in their body. And I would often hear their disappointment.
So I decided to close up that space and open up a little bigger studio. And bring my Pilates studio over in one room, but I would add another room, and I would call it the Ultimate Workout. And I'm an exercise physiologist, I have a master's degree in it. So all I did was take the science of how the human body is designed, and how it works, and I figured out everything that you would need to do if it was going to be an hour work out. What would have to take place in that hour to metabolically charge the body at it's highest rate for success. So I opened up that studio, and the workout was working incredibly. People were just plugging flooding in. They couldn't believe in such a short, short period of time, the kind of results that they saw.
And one of the member's husband was in the franchising world. And she came in one day to my studio, and she said, Ellen, you should speak to my husband. He's been involved in the Massage Envy and the European Wax Center's franchising world. And he opened-- him and a partner, actually, started their own franchise company and they're looking for the next big thing, as far as a concept. Well, at that time, I actually-- and I chuckle every time I tell this part-- I actually turned her away and said, you know what? I'm great in my studio. I'm doing great, and I don't think I'm interested in franchising. I know nothing about it. And she left.
Thank God she came in about a week later. And she said to me again, I really think you should speak to my husband and I took her up on that second round. And I spoke to her husband. He came in with his partner, took the work out, spoke to me, and really felt that there was something big here.
So we partnered off and we decided to open up a pilot studio in 2010. So in downtown Fort Lauderdale, we opened up the first Orangetheory Fitness studio. It was just under 3,000 square feet. Again, that was-- well it'll will be eight years in March. So it's still seven short years ago. And today we have over 740 studios opened. We're in 16 countries. We've sold over 1,010 studios. So it's pretty crazy and remarkable ride to say the least.
Wow. That's very, very interesting. Tell us about the name, Orangetheory. Is that based in some of the science that you talked about or is that more of a marketing and branding thing? How did you come up with that?
The theory is exact that. So the theory is, as an exercise physiologist, I knew, in order to spike someone's metabolism, I would need to get their heart rate over 84% for 12 to 20 minutes within that hour workout, with other components that I would have to put in there. Which would be power. Which would be non-impact muscle overload. Which also would be, inside stabilizer work. So this is all, what I knew had to take place in the hour, in order for the body to be successful. So yes, the theory part is that you need to get your heart rate-- which we are a heart rate-based workout-- over 84% for 12 to 20 minutes.
We have our own Orangetheory OTbeat heart rate monitoring system. We have many versions of it, from chest strap to wrist strap to the Flex, and we're even coming out with another one. Basically, it measures that heart rate over 84%-- it is the orange zone, when you're over 84%-- and it measures that. So by the end of class, you could see if you achieve that at least 12 minutes, even if you didn't, it gives you information, that gradually, you'd want to build up your intensity that you got at least 12 minutes in the orange zone.
So is that what really differentiates your gyms, or your studios, from a lot of the competition? So I mean, just personally, I've been to CrossFit, I've done other types of training, is it really that blend of the technology and actually monitoring and trying to hit that 84%? Or if not, could you tell us what other things kind of differentiate Orangetheory?
Yeah, I don't doubt any workout. Being that this is what I've done for over 40 years, any human bodies that I can get moving in whatever it be that they choose, I encourage that. The uniqueness of our workout, it's for all levels of people. When I created the workout, I created a walker category, a jogger category, and a runner category, because I found most of these group fitness programs are usually geared to the 20% fit people. And if you don't fit in that category, you walk into that workout and you feel left out. And many times you leave it been feeling unsuccessful.
So I used the psychology of fitness, as well as the physiology, when I created the workout. So yeah, it's definitely number one, heart rate-based training, which I believe we're doing better than anyone else. And then there are those other components in the workout of making sure everyone feels successful. So all levels are welcome.
As I said, there is a power component. So for example, CrossFit uses explosive jumps up and down off boxes for power. Well, I know my knees had no interest in that, and many of my [? members ?] had no interest in that. So I had to find a non-impact form of power. So that's what we use the rowers for. Rowers, in our workout, are used to create power. How we use them, many different workouts use them for different reasons, but we use all that equipment for very specific-- based on physiology and the science. So we use that for the power.
We use the TRX straps for your inside stabilizer muscles. So you have three anchors in the human trunk, the shoulder, the spine, and the pelvis. And if everyone is just in gyms, in different workouts, and they're just working the outside muscles, and not those inside muscles that anchor your trunk, you're a person who ends up, after a couple months, or even a couple of years, and you say, wow. What's going on with my shoulder? It's been bothering me. What's going on with my hip? What's going on with my knee? I know this as a physiologist. I know this from teaching people fitness for over 40 years, so I made sure that there was inside stabilization work. And so we use the strap, maybe not how other people use the TRX strap. But I use the equipment for very specific physiological reasons of how I designed the workout. So we use the strap inside muscle stabilization work.
And then we use dumbbells and small gym equipment for you're outside muscles. So that's the uniqueness [? we offer. ?] It a very science-based, physiology-based, driven workout. And the other aspect that's very different is all the workouts are designed at the corporate office. I have a fitness team that works under me. I meet with them every week. We designed the workouts and we send them to the studios.
Unfortunately, the fitness industry is an unregulated industry. Even a massage therapist has to pass a state exam, and then you can at least know they know something about the body as they're massaging you. Unfortunately, in fitness, I could have nine years with a master's degree in exercise physiology and you could go this weekend, on the internet, and you could take some kind of bogus fitness certification, and we're both called fitness professionals. Unfortunately, the consumer doesn't know that. So you're in a gym or you're in a class somewhere, and maybe Joe looks good, and he's got a great looking body, but that doesn't mean he knows how to train your body. [? So ?] [? what's ?] different from us, is I make sure that all of the workouts are physiologically sound. And they're sent to all of our studios. We don't rely on various certifications to promote how a person should train for an hour in a group [? setting. ?]
Right. So let's kind of go off that a little bit. You described a little earlier, the franchise model which has really helped you grow so quickly from a single location back in 2010, up to over 700 today. Tell us a little bit more about that. I mean, it sounds like you try to keep things pretty standard and consistent by sending out the workouts. What are some other, you think, benefits of your franchise model?
Yes, so we have 70 regions. And these regions are led by ARs, area representatives. And these are individuals we look at closely, that they're going to really keep our product very, very consistent. They're going to keep their area franchisees very motivated and consistently growing and excited about our brand. That's worked real well because then what happens is these ARs, they make sure that they're always giving a further education, they're electing the right franchise or franchisee to put up a studio.
You know, this is very challenging. We don't sell a product. We sell human exercise, human physiology and movement. That's quite a feat to be able to do that maybe 1,000 times over by the end of mid next year, which will probably have opened studios and be consistent. So those ARs very important to us. And they've been doing a fabulous job of taking their areas, their regions, and keeping them consistent and educated.
We have a conference every year. We just came back from ours in San Diego. We had 1,700 participants and it's all educational. We have front of the house, sales, marketing, customer service. All high level education for all of our SAs, those are our sales associates. And then for our business coaches on the floor, we have a medical board of exercise physiologists and medical doctors, and we make sure that all of the sessions they're getting are very high level sessions.
This is very unique. We've invested a lot of money in being a very high-end fitness product, just because that's where I come from, being a physiologist and being research-based. And my partners, luckily, have been-- you know, I call it the perfect storm, with the gentleman I'm partnering with because they're experts in the franchise field. They let me be the expert in what I am, in fitness and we just really combine our efforts, I feel, to produce the best franchise in fitness out there.
Right. You mentioned consistency. If I were to travel and let's say visit a studio in Ohio and then go to one in California, would I notice a difference? Are they very consistent or are the franchise owners allowed to do some things on their own?
Ideally, you would, but, of course, as we know, that definitely gets challenging. You definitely get some people that sometimes think certain things can be done better. Because maybe they owned a different kind of business somewhere. They're excellent, excellent business people who are part of our franchise model, but sometimes you got to rein it in a little and re-educate about how important it is to stay consistent to what we're doing.
And if there are things and suggestions that they have, that maybe things could be done a little bit better, we are so open to looking at that. We actually have a board made up of franchisees that come together with suggestions from other franchisees in their area. And we speak to them often. And we have changed things for the better, that maybe work better out in the field, as we've gone along. We really understand this is a two-way street. I think that helps to keep people consistent with us because they don't think that we're up in an ivory tower just dictating things. So I think it's all that relationship that you build. I believe we have a very good one and it keeps getting better because they know that we're on the same team.
I also notice that you have studios outside the US, I believe it's in 16 different countries. What are some of the factors you look for when you think about markets and how well the Orangetheory model will translate into a different market or a different country? How does that all work?
Yes, that definitely gets challenging because not only do you have language barriers in some countries, but cultural barriers. I mean in Kuwait, it's all female. They come in fully covered up. You have to cover the windows. I mean there's a lot of interesting type of things [? really ?] [? comes ?] to [? light ?] as we've enter some of these countries. But you know what I have learned about international, which was new to me, is that they love-- from America, from the United States-- they love business in a box, it's called. And basically, it's where they find a very successful model, and then they don't want to have to figure it out. They don't want to have to figure out heart rate-based training and start to create studios and so on and so forth. There's great interest in that.
So I would say probably the most important thing there, is finding the right partners to make sure that the individuals who will be the franchisee or repping the country, that they really fully understand all the components of it, the consistency of it. And really we rely on them to tell us, now, do you think this is a good fit? Because if there are some major cultural differences, how we do this work out, how we produce this product, you know, they're not going to be successful and we're not going to be successful. So that is definitely treading on a little bit more delicate kind of [? troubles ?] there, but it's something we decided to dabble in, just because they were banging down our door. They really wanted this great heart rate-based model, basically, business in a box.
Right. Let's shift gears a little bit here, you talked a little bit earlier about some of the heart rate monitoring and the data and certainly the physiology that goes into this. Tell us a little bit about how other new technology platforms might impact the customer experience that clients have when they visit your studios. Are there new things that you're looking at or data collection or analytics? I mean, what are some of the interesting customer experience technology related things that Orangetheory's looking at?
Yes, that's the most exciting thing going on right now. I recently hired a PhD clinical exercise physiologist, full time. So when you talk about the differences in fitness companies, I don't think anyone's putting one of those individuals on full time, because that's quite a financial commitment, as well as all those people do, is want to do research. And that's exactly what we want.
So this individual has just come on board. We're putting together a lab at the corporate office. And he is literally going to start studies to prove that not only we are a great exercise model that does give weight loss results and all of these other kind of fitness results, but that this workout actually gives you more life. What we mean by more life is longevity. You're not going to only live more of a quality life and existence you have today, but we are going to be brave enough to say, we can extend your life if you do this workout two to three times a week.
So we are going to be introducing, in the beginning of 2018 tablets in all of the Orangetheory Fitness studios. We will have benchmarks that our clinical physiologist and our fitness department have put together. So say you came in for your first class, you would take it and there would be benchmarks. So for example, what you do the one mile in. It could be walking, jogging, or running. What you do a 200 meter row in, which detects power in the human body. It'll be six different variables we'll be measuring, and then, every quarter, you'll be measuring them again. And we're going to be able to prove that we're just not a fitness model, but we're a model that gives you longevity. We're a model that makes you physiologically healthier.
He's going to start studies where he's taking blood work, going to be doing all-- taking control group. I mean, right now, to go through that process of research studies, validate it, is quite extensive. He's already started that process. So we'll be the first group fitness product that is going to be able to have studies based just on their workout to prove that this work out gives you more life.
Wow. That's really interesting. How about outside the studio, do you use social media at all to engage with your clients and kind of keep that relationship and momentum going, from the time they're in for a workout till maybe when they're going on with the rest of their day.
Luckily, we have such an excited network of Orangetheory Fitness ambassadors out there. They are all over Facebook and they are just talking about all their successes. We have, what we call personal successes, where an individual, like I said, we're going to be monitoring it with our technology in 2018. But right now, it's just been on a small scale in the studio, where we know someone has done the one mile jog at a faster pace, which basically means they have a stronger heart, and they put it on Facebook. So we have a very, very active-- with our employees, as well as our members in our studio, of their successes.
We also are very big on education and giving science-based information. I do fitness tips that get sent out on social media to all the studios to tell them how to exercise better. You know, we have a very active member and employee population so it hasn't been a ton of work to have to go out there and motivate people to get onto social media. Luckily, that's been very organic.
Right. That's great. What about working at Orangetheory Fitness? For such a fast growing company, what's the culture like? What are the things that you think keep your associates and employees engaged and highly motivated by what they do?
Yeah, we have a unique kind of fitness corporate office, we call ourselves the Google of fitness. So we just opened up our building in Boca Raton and we have the EPOC room. So EPOC is excess post-exercise oxygen consumption. So the theory of our workout is if you get that heart rate over 84% for 12 minutes, minimum, you're going to be burning calories about 20% more, at a higher rate, for the next 24 hours after. I didn't make this up. This is based on science. There's [? a bunch of ?] research in regard to this, going as far back as the 1940s. So we have our room, called the EPOC room, which is kind of a cute name, and in there, we have everything from pool tables to ping pong to shuffleboard to TVs, video games, and our employees are welcome to go in there, to eat lunch, to take a break, whatever they need.
We recently opened up our Wellness Center and I'm really excited about that. And our Wellness Center is everything from flotation device pods-- I don't know if you've seen those saltwater pods-- where you lay those and it's more relaxing than anything you've ever done. We have infrared sauna, we have a meditation room, we have yoga classes that go on, we have our own Orangetheory Fitness studio for our employees at the corporate office, that classes take place. So they, literally, have their own little city that has every need that they would love. And they are just so thrilled with all of these benefits that they get there. We know that to keep our employees very energized-- and we're moving at a very, very fast pace.
I know that one of the questions is, what do you think some of the challenges are for your company? The challenge is a great one. We're moving so fast. It's very difficult to catch your breath. We're in the push pace, if you had to refer to the workout. So our heart rate is definitely over 84%. So that's the challenge, is the pace. And so to keep these employees just moving at that pace and staying motivated and excited and we've got that. We know we have to do our end. And that's putting the EPOC room together, that's putting the wellness center, we try to really take care of them with all kinds of activities. I mean we're literally going to be boating over to the Bahamas for our Christmas party. Our entire corporate office, having them spend the night at one of the resorts and then boating back. We want to take care of the them.
Sure. So it's not a stretch to say they're literally living and breathing the work.
They are totally living and breathing the work.
Yeah. Well, my last question for you, Ellen. So you mentioned some of the challenges-- I mean, really, just keeping pace-- but what are some of the other things that keep you up at night as you worry about-- think about the business and the future of Orangetheory?
You know I think that it's really just the education part of it. As you get bigger-- you know, it's very easy with a few studios, for me to run around or even travel to go keep this high level education. That is what I am interested. I spent over 40 years and I've study every one of those. I call it-- I'm an intentional learner. Maybe you can relate in your career, where you're just always trying to learn something. Or people would laugh at me, why do you need to go to another workshop? Another conference? Because I'm an intentional learner. If I could pick up a few things, that's just how I roll.
So I really want to do that with our population out there of educating on this very high level brand of fitness. So it's, how do I do that at a thousand studios, 2,000 studios. How do I do that in another language? So me personally, all I could speak to me, my partners have different responsibilities in our company. A little bit more real estate sale so on and so forth. So that would be maybe some of their drive. Mine is basically the fitness product. It's really keeping at this very high level product that we're going to move in to. And how we can keep that education so profound out there.
I mean, this is literally a workout you could do up into your 80s. We have individuals in their 80s doing this workout. I'm 61, and believe me, it keeps me very, very young, this workout. So it's something that definitely-- this more life campaign that we're doing, I believe in so hard. It's so important to me because I just-- so for me, what keeps me up is to be able to educate and to keep this information out there, of how our product-- I call it the multivitamin.
I say, just take an Orangetheory, two to three times a week. Keep your yoga class, go to CrossFit, go to Pilates, but those are single vitamins. That's a vitamin A, that's a vitamin K, that's a vitamin D. Your multivitamin of everything I know about the human body and the science, is Orangetheory Fitness. And Everything you do in an hour workout. Just do that, two to three times a week. And keep everything else that you're doing. So to me, it's getting that message out there a big way.
Wow, that's really interesting. Well, I've certainly learned a lot about your company. A little bit about fitness. A little bit about some of the science that goes behind it. And we really just want to thank you and appreciate you jumping on the call today and joining our podcast by phone. Feel free, for those listening, if you want to subscribe to our podcast, you can find us on iTunes, Stitcher and everywhere else where podcasts are offered. You can also follow all of our work at the National Center for the Middle Market by visiting our website at www.MiddleMarketCenter.org. And we thank you and look forward to talking to you next time. Thanks, Ellen.
Thanks so much. Bye bye.
Bye.
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