Dave Knox: What was the situation at CycleBar when Xponential took it over and how did that prepare you for 2020?
Trevor Lucas: When we took over CycleBar, the businesses were struggling. 70% of our franchisees were losing money and we had to pivot very quickly to get them into a good spot. We spent the last three years with our heads down and really grinding. We worked with our franchisees to change out their CRM and POS systems. We switched out their website and their app. We threw a bunch of new tools at them and operating procedures and requirements.
The foundation started back in 2017 when we took over the brand. Those pillars that we put in place then are really what are helping us succeed today. And it all started with building a strong foundation in terms of sales and marketing. The boutique fitness really is a sales and marketing business. The experiential part, the fitness part is the fun part. And that's the product that we get to sell. But if you don't have systems and processes to drive in new leads and then those same systems and processes to convert those leads into members, and then the third part is having the processes to maintain those members, then you really can't run in this model effectively. The first thing we did when we took over the brand was we hired a sales team and we flew them all over the country just to teach our franchisees how to sell. The branding of CycleBar was phenomenal, but the thing that was missing was that there wasn't lead flow. So we restructured the team to be solely focused on driving lead flow and really driving lead flow into each individual studio.
And not one time did they go backwards. We hit 30 straight months of double digit same-store sales growth through that period. We doubled their monthly revenue, which took them from being 70% of them losing money to flipping it the complete other way to where the vast majority of them were in profitable. That has made us battle-tested at this point and gave us a lot of confidence as we entered the start of COVID. We had a ton of knowhow that we could fall back on in terms of how we can pivot quickly, move quickly, and really have a sense of urgency.
Knox: Did you change anything with the business model during this time and how did that help as COVID hit?
Lucas: A big focus was on moving the business from being more transactional in terms of selling one package that would be 10 rides for a certain dollar amount that didn't renew to go into a recurring model. We pivoted them to selling memberships. Some were doing that when we bought CycleBar, but it wasn't the focus for them. About 30% of the revenue was memberships and by the time COVID hit in March, we were at 70% of our revenue was coming from recurring memberships. So as we fast forward all the way to COVID starting, they're in a much better revenue standpoint.
Knox: Did you change anything with the business model during this time and how did that help as COVID hit?
Lucas: A big focus was on moving the business from being more transactional in terms of selling one package that would be 10 rides for a certain dollar amount that didn't renew to go into a recurring model. We pivoted them to selling memberships. Some were doing that when we bought CycleBar, but it wasn't the focus for them. About 30% of the revenue was memberships and by the time COVID hit in March, we were at 70% of our revenue was coming from recurring memberships. So as we fast forward all the way to COVID starting, they're in a much better revenue standpoint.
Having all of that recurring base, all of those members to rely on is really what helped push us through when COVID hit. Like everyone, we didn't really know how this thing was going to play out. It was really that member base that helped push us through. The first thing we did to keep revenue going and really to keep our members connected was to go virtual with Xpo GO and CycleBar GO. We also pushed through a new gift card program so that there was another way that folks could support their local studio. They could purchase a gift card and we got all of that money directly back to the franchisees. But the piece that really helped was GO. We have 8 different modalities at Xponential and we gave everyone 60 days free access to all of the modalities that we have. So if you didn't have a bike at home, well, that's okay because you could do stretching or Pilates or barre, and that helped people as well. Just giving them another option to kind of stay plugged in with us.
Knox: You mention the virtual side of the business with GO but CycleBar has really focused on also getting people back into the studio. Why did you focus on that so much if virtual was working well?
Knox: You mention the virtual side of the business with GO but CycleBar has really focused on also getting people back into the studio. Why did you focus on that so much if virtual was working well?
Lucas: As we started reopening the studios, we saw that there was this huge need where people wanted to get out of the house. It's really the community piece of it, just being together. Our class experience is really geared to that, to being super accessible. It's for everybody. It doesn't matter your fitness background or age or sex or anything related to that. Everyone is welcome. The ride is setup so everyone can do it. And I think that piece is what really engaged people back in. We also wanted to show the health benefits of not only getting back in and working out, but also the health benefits of being around people and being around community and having that feeling again from a mental wellness standpoint.
GO has become an augmentation to what we are already doing. We have folks that they can only make it in a couple of days a week because our lives have changed a lot with work from home and virtual schooling. So the dynamic of how people interact with us has shifted a bit. We can do class times at times we normally wouldn't do them. But it's also giving the flexibility that, "Hey, if you can't make it in with us, but you have a bike at home, you can ride with us." But I think for us Xpo goes even bigger because there's different pieces of Xponential GO that allow folks, "Hey, if you can't make it into a class, you can still get a workout." That is the power of our eight modalities. I think that just augments their experience if they get bored with cycling. They can try something virtually and see if they like it. It is unlocking access to these other brands that people may not know about yet. We have some new and emerging brands in the rowing and stretching, in yoga, in dance. It's all these different pieces. So it's really exposing those folks to all these different pieces, and I think that helps as well and it makes them a little bit more sticky for us to.
Knox: Whether it is in the studio or virtual, the heart of CycleBar is the instructors. How have you kept that part of the business going?
Lucas: It's a ton of effort. We have an amazing VP of experience, Tevia Celli, who's really been in this business since the beginning. She's created the CycleBar method and the various rides that we do and really her goal is that accessibility. She always says it's for everybody. And our number one goal is just to make people feel good. Through that, she's been able to build this community of instructors. And not only instructors at the studio level, but instructors that we call master instructors, which are ones that help us. They work for the franchisee during the day, and then on the side, they work for us and help build this environment. There is a career path where they can become a master instructor, but in between that, we created a lead instructor role where the lead instructor manages the other instructors within each individual studio. You come in as an instructor, then you move to a role as a lead instructor. And then if you do well and you continue to sustain with the brand and you stand out, then there's a path to a master instructor as well. So folks can make a career out of this, and that's really more than anything is what keeps them engaged with us.
We also have a world-class training program. We use to fly our master instructors all over the country for in-person training. We would fly them out and we would do what we call bootcamps to train folks and we would help recruit and do those kinds of things. But once COVID hit, all of that stopped. It's always a blessing sometimes when different things happen, because from a training standpoint, we had to go virtual and the virtual program that Tevia and her team unlocked is something we'll actually never go back from now because it's so much more successful in the platform that we built on. We went from studios having to recruit and train instructors themselves to a whole virtual training program where there is a set curriculum. We are seeing an 80 to 90% pass success rate through that process. Not only has virtual driven out costs, but we're seeing a better instructor coming through.
Once someone passes through the training, we plug them in with our community. This includes both weekly and monthly calls. But there is also a Facebook community that only our instructors have access to. I don't even have access to it. I've never even seen it. It's a safe environment for them, but it's really where they exchange ideas. The information sharing and the community that they've built online has just been phenomenal. They're all friends. It's amazing. When we did in-person trainings, folks would fly out and they would all find Airbnb's together. It would be one instructor from Florida, one from Idaho and one from Texas, and one from New York. But they all knew each other from this online environment and they all became close. So they would all room together. It was amazing to see that community that was also built. More than anything, that is what keeps our instructors engaged and makes it such a special place.
GO has become an augmentation to what we are already doing. We have folks that they can only make it in a couple of days a week because our lives have changed a lot with work from home and virtual schooling. So the dynamic of how people interact with us has shifted a bit. We can do class times at times we normally wouldn't do them. But it's also giving the flexibility that, "Hey, if you can't make it in with us, but you have a bike at home, you can ride with us." But I think for us Xpo goes even bigger because there's different pieces of Xponential GO that allow folks, "Hey, if you can't make it into a class, you can still get a workout." That is the power of our eight modalities. I think that just augments their experience if they get bored with cycling. They can try something virtually and see if they like it. It is unlocking access to these other brands that people may not know about yet. We have some new and emerging brands in the rowing and stretching, in yoga, in dance. It's all these different pieces. So it's really exposing those folks to all these different pieces, and I think that helps as well and it makes them a little bit more sticky for us to.
Knox: Whether it is in the studio or virtual, the heart of CycleBar is the instructors. How have you kept that part of the business going?
Lucas: It's a ton of effort. We have an amazing VP of experience, Tevia Celli, who's really been in this business since the beginning. She's created the CycleBar method and the various rides that we do and really her goal is that accessibility. She always says it's for everybody. And our number one goal is just to make people feel good. Through that, she's been able to build this community of instructors. And not only instructors at the studio level, but instructors that we call master instructors, which are ones that help us. They work for the franchisee during the day, and then on the side, they work for us and help build this environment. There is a career path where they can become a master instructor, but in between that, we created a lead instructor role where the lead instructor manages the other instructors within each individual studio. You come in as an instructor, then you move to a role as a lead instructor. And then if you do well and you continue to sustain with the brand and you stand out, then there's a path to a master instructor as well. So folks can make a career out of this, and that's really more than anything is what keeps them engaged with us.
We also have a world-class training program. We use to fly our master instructors all over the country for in-person training. We would fly them out and we would do what we call bootcamps to train folks and we would help recruit and do those kinds of things. But once COVID hit, all of that stopped. It's always a blessing sometimes when different things happen, because from a training standpoint, we had to go virtual and the virtual program that Tevia and her team unlocked is something we'll actually never go back from now because it's so much more successful in the platform that we built on. We went from studios having to recruit and train instructors themselves to a whole virtual training program where there is a set curriculum. We are seeing an 80 to 90% pass success rate through that process. Not only has virtual driven out costs, but we're seeing a better instructor coming through.
Once someone passes through the training, we plug them in with our community. This includes both weekly and monthly calls. But there is also a Facebook community that only our instructors have access to. I don't even have access to it. I've never even seen it. It's a safe environment for them, but it's really where they exchange ideas. The information sharing and the community that they've built online has just been phenomenal. They're all friends. It's amazing. When we did in-person trainings, folks would fly out and they would all find Airbnb's together. It would be one instructor from Florida, one from Idaho and one from Texas, and one from New York. But they all knew each other from this online environment and they all became close. So they would all room together. It was amazing to see that community that was also built. More than anything, that is what keeps our instructors engaged and makes it such a special place.
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