Orangetheory Fitness CEO Dave Long was waiting for the right time to move the company's Fort Lauderdale, Florida, corporate headquarters to a larger building.
That time arrived this month with the $13.9 million purchase of a larger, 77,000-square-foot building in Boca Raton, Florida. Orangetheory Fitness corporate employees are packing their boxes for the Sept. 1 relocation about 20 miles to the north as the franchise grows its domestic presence and prepares to focus on international expansion in 2017.
"We knew at some point we were going to outgrow our existing space," Long told Club Industry this week. "We had really been looking for a larger office building to buy or rent the last couple of years, and fortunately the timing came together with the right size building and the right environment for us."
The 100 corporate employees will immediately occupy about 36,000 square feet in the new building, Long said. One of the more notable amenities at the Boca Raton headquarters will be a full-size Orangetheory Fitness studio for franchisee training, product testing and programming development. Because many corporate employees struggle to find availability in Orangetheory Fitness classes in the area around the Fort Lauderdale office, the studio also will offer classes for employees. Other highlights will include open common areas, relaxation spaces, collaborative work spaces and a more centralized location near a rail station for commuting employees.
Founded in 2009 in Fort Lauderdale as a single club owned by Ellen Latham, Orangetheory Fitness and its heart-rate based workout grew after Latham brought Ultimate Fitness Group LLC founders Long and Jerome Kern on board. Orangetheory Fitness, which started franchising in 2010, had 26 clubs in 2012, 61 clubs in 2013, 157 clubs in 2014 and 338 clubs in 2015. Today, it has more than 400 studios in 38 states and seven countries. The brand's revenue in 2015 grew 208 percent over 2014 to $47.5 million in corporate club revenue and franchisee fees, according to the form the company submitted for this year's Club Industry Top 100 Clubs list. The Top 100 list, (the 2016 list will be released in late July) does not allow individual franchisee revenue to be reported.
Domestic and International Expansion
When Long discussed Orangetheory's growth with Club Industry in 2015, he anticipated the franchisor would have 500 to 550 locations in operation worldwide by the end of 2016. The week, he said that the company will have 500 open by August or September and a total of 600 open by the end of this year.
"Our interest in the U.S. and international continues to grow to the point where it's almost challenging because there's so much interest in the U.S. right now," Long said. "We still have quite a few areas for people to develop, but in the next 12-18 months, that's going to get fairly tight."
Long expects to open 250 U.S. locations and 150 international locations in 2017 alone, which would give the franchise 1,000 locations worldwide by the end of 2017. In April, Orangetheory Fitness received a growth equity investment in an undisclosed sum from an affiliate of Roark Capital Group, an Atlanta-based private equity firm with a focus on the franchise industry.
"Every year we think it can't get much more exciting and the growth can't get more rapid, but every year we continue to outpace the previous year," Long said. "That's what we intend to do in 2017. What will change in 2017 is there will be a lot more international growth."
In April, Orangetheory Japan Co. Ltd., the first master Orangetheory Fitness master franchisee in Japan, signed to open 70 studios with the first opening this fall in Tokyo. International expansion coming in 2017 also will bring Orangetheory Fitness to Hong Kong and parts of Germany, Long said. The company currently has international locations in Canada, England, Australia, Mexico, the Dominican Republic and Colombia.
Specialty Fitness Trends
Orangetheory Fitness continues to ride a wave of fitness consumer engagement in the specialty fitness space. ClubIntel predicted at the end of 2015 that boutique studios would continue to flourish and alter the fitness industry in 2016, noting 42 percent of health and fitness consumers frequented boutique studios in 2014. Millenials are the demographic driving the growth, according to the report.
The average Orangetheory Fitness customer visits the studio two to three times each week, Long said.
"We know that there is still a large percentage of our consumers that still have their big-box membership as well and they probably use it less, but they keep it and they still use it," Long said. "We're seeing them do cross-training, use their big-box gym, and also there's yoga/Pilates offerings and even group cycling that we're seeing are part of their regime. I think the trend is still people are decentralizing, and they're OK with going to a few different outlets to meet their overall fitness and wellness needs."
In March, Orangetheory Fitness launched its Mio-manufactured OTBeat Link wrist heart rate tracker and integrated it with the Netpulse-designed OTbeat app platform. The app has received more than 200,000 downloads since launch, and more than 80 percent of those users are using the app to track a workout or multiple workouts outside of the studio, Long said.
"It has been received really well," Long said. "When given an option, typically they [Orangetheory Fitness customers] would prefer to slap on a wrist strap or a bracelet if they don't have to deal with a chest strap. What we're seeing is that we're producing a lot of quantity, and we're more or less selling through everything coming from the factory at the studio level."
Orangetheory Fitness' use of heart rate monitoring as part of its programming model is not a new concept in the health club industry, but the use seems to have grown in the past few years. Heart rate technology products were prevalent at IHRSA 2016 in March when several vendors offered solutions for clubs wanting to integrate digital features in group exercise programming.
Long recalled a time when the heart rate monitor was a niche and Orangetheory Fitness studios needed to educate consumers on its use as part of an exercise plan. The growing awareness and utilization of heart rate technology is good for the health club industry and the consumer, Long said.
"The fact there's a lot of other players in the industry that are integrating heart rate into their existing programming or integrating a heart rate system into a larger club – we think that is a good thing," Long said. "We've got a lot of other kind of unique points of why people want to come to an Orangetheory facility. It's not just about the heart rate monitoring. But the fact that the consumer is getting more educated on it and has more buy-in on just how good it is – we think that is good for everybody. The reality is that if you're tracking heart rate during your workouts, you're typically going to get better results because you're going to understand how to work out more efficiently."