Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How One Fitness Studio Scaled to 50 Locations Without Owning a Gym
Transcript
- Lucas: So there's this boutique fitness chain called Pulse & Pedal — you've probably seen their studio names pop up in strip malls and mixed-use developments across the Southeast. They hit fifty locations last quarter. Luna: I have seen them. Neon sign, spin bikes facing a wall of mirrors, classes start at like six AM. But fifty locations — that's legit mid-market. How long did that take? Lucas: Seven years. The founder, a former CrossFit coach named Jenna Ortiz, started in 2019 with a single rented church hall in Charlotte. She paid the church two hundred dollars per class. No lease, no build-out, no liability beyond the mats she rolled out each morning. Luna: Okay, so pop-up fitness. Loads of yoga teachers do that. But she got to fifty locations — so she clearly figured out how to institutionalize the pop-up. Lucas: Exactly. The key insight was that commercial real estate owners, especially after the 2022-2023 interest rate hikes, had a lot of vacant retail space they couldn't fill. Jenna approached them with a proposal: let me use your empty square footage from six AM to noon, Monday through Friday. I'll pay you a percentage of the class revenue — usually twenty-five percent — and I'll cover liability insurance. No base rent, no long-term commitment. Luna: So she's essentially turning dead daytime hours into a revenue stream for the landlord. That's smart. But does the landlord actually take that deal? Lucas: Enough did. Her first real location after the church hall was a former mattress store in a strip mall outside Charlotte. The landlord had been sitting on it for eighteen months. Jenna offered him fifteen hundred dollars a month on a revenue-share model — he would have needed five thousand to cover his mortgage. But fifteen hundred was more than zero, so he said yes. Luna: And she's not paying for build-out either, right? Just mats, bikes, maybe some mirrors. Lucas: Right. Her total capital expenditure per location was about twelve thousand dollars. That's bikes, sound system, storage bins, and a mobile check-in kiosk. Compare that to a traditional boutique fitness studio, which typically spends anywhere from one hundred fifty to three hundred thousand on leasehold improvements alone. Luna: So she can open a new location for the cost of what a traditional studio spends on flooring and paint. That changes the unit economics completely. Lucas: It does. And it also means she can afford to fail. If a location doesn't hit critical mass within three months, she just pulls the mats and moves on. She's shut down seven locations over seven years. Average loss: about eight thousand dollars per dead location. Luna: That's basically a cost of experimentation. Most fitness chains can't afford to experiment like that because they're locked into ten-year leases. Lucas: And that's exactly how she built the playbook. Every location had to hit a specific metric by month three: cost per class-hour had to be under forty dollars. That's total operating cost divided by the number of class-hours offered in a month. If cost per class-hour was above forty, she'd dig into the data — low attendance, high instructor pay, wrong time slots. Luna: So the metric isn't revenue per location — it's efficiency of the space she's renting. Because she's not paying fixed rent, the variable cost is what matters. Lucas: Exactly. And that metric let her scale fast. By 2024 she was opening a new location every six weeks. She had a tiny operations team — basically three people: a real estate scout, an instructor recruiter, and a scheduler. Everything else was outsourced: payroll, billing, even marketing. Luna: I want to ask about the marketing piece. How do you fill fifty locations without a big ad budget? Lucas: She used a referral model that's almost old-school. Each member gets a punch card — ten classes, and if you bring a friend who buys a punch card, your next five classes are free. The punch cards cost fifty dollars and never expire. That creates a low-friction trial for new customers and a real incentive for existing ones. Luna: So the customer acquisition cost is basically the cost of the free classes she gives away. And since her variable cost per class is next to nothing when the space is already paid for via revenue share, that's a great trade. Lucas: Right. Her overall customer acquisition cost across all locations is about eleven dollars per new paying member. Industry average for boutique fitness is around seventy dollars. So she's operating at a fraction. Luna: And the model naturally caps growth at some point, right? Not every landlord wants a fitness class in their empty retail space. There's noise, foot traffic, liability concerns. Lucas: That's the constraint. Jenna told me that roughly one in four landlords she approaches says yes. The rest either want a traditional tenant, or they're worried about wear and tear on the floors. So she's built a real estate team that pre-qualifies leads by focusing on landlords who are already sitting on vacancy for more than a year. Those are the ones desperate enough to try something unconventional. Luna: It's like a reverse version of the WeWork model — instead of taking long-term leases and subletting, she's taking zero-term leases and sharing revenue. Landlord gets upside without downside. Lucas: And there's a natural ceiling to how many locations she can open in a given metro area because the available real estate eventually dries up. She's currently in about fifteen cities across the Southeast and Texas. Her next move is interesting — she's piloting a franchise model where local instructors pay her a flat fee to use the Pulse & Pedal brand and the pop-up playbook. Luna: But earlier you mentioned she tried franchising once before and it didn't go well. What happened? Lucas: In 2023 she franchised her first five locations outside of Charlotte. The franchisees paid a twenty-thousand-dollar fee and a six percent royalty. But she quickly found that franchisees weren't following her metric discipline. They'd hold classes at weird times, or they'd rent space that was too expensive, and suddenly cost per class-hour would spike. She had to buy back three of the five franchises within a year. Luna: So the model works because of a specific operating discipline that's hard to teach. That's a classic scaling trap — the founder's intuition doesn't transfer. Lucas: Exactly. Now she's trying a different approach. Instead of a traditional franchise, she's licensing the brand and the system to experienced fitness operators who already run their own pop-up classes. They pay a flat monthly fee of five hundred dollars for the brand, the booking software, and the instructor network. She's betting that operators who already understand the variable-cost model will be more disciplined. Luna: So essentially she's creating a cooperative of micro-entrepreneurs. That could scale very differently — maybe a thousand locations eventually, if she can find enough operators. Lucas: That's the bet. And if it works, Pulse & Pedal becomes less of a fitness chain and more of a platform. Jenna's goal is to hit two hundred locations by 2029, with the majority being licensed. Luna: You know, this conversation actually reminds me of something we've been hearing from listeners. A lot of people say this show has helped them think differently about their own business constraints — like, what if you don't need to own the thing you're selling access to? If you've found value in that kind of reframing, and you want to support the show staying ad-free, you can buy us a coffee at buy me a coffee dot com slash fexingo. It genuinely helps. Lucas: Yeah, we don't run ads, so listener support is what keeps this going. And we really appreciate it. Back to Pulse & Pedal — one more thing I found striking. Jenna told me that her most profitable location is a tuesday thursday only studio in a church basement in Greenville, South Carolina. She pays the church two hundred fifty dollars per month, runs sixteen classes, and nets about four thousand per month profit. Luna: A sixteen class a month location pulling in four grand? That's a two hundred fifty percent margin on variable cost. You'd never get that with a traditional lease. Lucas: And that's the whole thesis. The asset-light model works because it aligns the landlord's incentive — fill dead space — with the operator's incentive — keep variable costs low. The question is whether it can scale beyond the founder's personal discipline. The licensing play is the big experiment. Luna: I'd love to check back in a year and see if those licensed operators are holding to the cost per class hour metric. That's the canary. Lucas: Absolutely. For now, Pulse & Pedal is proof that you don't need to own a gym to build a fitness chain. You just need a decent mat, a spreadsheet, and a landlord who's tired of empty windows.