If running is the basic unit of exercise, the gym is the fitness industry’s local headquarters. Walk a few blocks in any city, or drive a few miles in any suburb, and it’s virtually guaranteed you’ll see some sort of fitness chain nestled in a strip mall.

The ubiquity speaks to the gyms’ importance in this fitness economy—for us as consumers, and for those looking to make money in our space. Fitness is front and center, and unashamedly so. Gyms aren’t hidden from you. On the contrary, fitness centers are in the same complexes as supermarkets, shoe stores, dry cleaners, and pizza joints. They’re a key part of our consumer habits.

That’s what excites investors. Just as Moelis’s Kapoor found herself directing more of her discretionary income to her Flywheel habit, even average people are devoting an increasing slice of their cash to sweating. Have any doubts about the competition for that money? Check your mailbox—or email box.

Numbers are somewhat elusive, and largely estimated, given the fragmented nature of fitness clubs; there are so many of them, and few dominant companies to give a cohesive sense of the market. Kapoor estimates that in 2015, clubs will pull in about $27 billion in revenues, a figure that grows steadily these days at around 3 percent a year.

Then there’s the number of memberships, which she estimates at about 55 million, growing at about 2 percent a year. Putting the figures together, that would mean folks spending roughly $500 a year on memberships alone. This triangulates a bit with another oft-cited figure—the average monthly membership is about $55/month, or $660 a year—indicating we’re in the right ballpark.

The traditional gym business did not explode in this most recent boom around fitness and wellness. Many of the current trends and fads have their foundation in the fitness clubs of the previous decades. It’s a business that’s seen its share of booms and busts and constant competition for the consumer. Where it stands today is an emblem of both the fitness economy and the way modern businesses fight for identity and profits.

Kapoor and her fellow bankers watch the gym space closely because it’s, for lack of a better term, investable. The business is relatively simple to model in term of costs, margins, and profits, once the basic elements (geography, products and services, pricing) are established. The gym business in that sense isn’t so different from any other retail concern.

The birth of what we know as the modern gym is generally pegged to the early 1980s, driven in part by a few pop-culture moments. In addition to Jane Fonda’s videos, there was 10, the 1979 Bo Derek movie that inspired many women, and men, to get in shape.

By 1980, according to history compiled by Club Industry, about half the adult population claimed to exercise, up from about 24 percent in 1960.¹ Tennis was popular, as was racquetball, and racquet clubs with both kinds of courts proliferated, especially in suburban areas. Over the early part of the 1980s, those clubs expanded their offerings, adding some equipment and classes to broaden their appeal and their membership. In 1981, there were about 5,000 fitness clubs across the United States; by 2012, that number swelled to more than 30,000.²

Clubs like Bally, one of the early stalwarts, advertised heavily, relying on some of the biggest stars of the late 1970s and 1980s, including singer Cher. The ads, available for grainy viewing on YouTube, are fun to watch. A very young Cher, in various combinations of leotards and wigs, strides through a busy fitness center, delivering a message meant to underscore that gyms aren’t just for meatheads anymore. In one ad, released around the holidays in 1985, she starts out saying, “Some people worry about getting muscles. I worry about getting fat. Dieting doesn’t keep me in shape. Exercise does.”

After Cher’s exhortations, the ad lays out the business model that Bally’s helped create and persists among its legion successors in some form today: the monthly plan. Back in 1985, Bally’s would sign you up for $18 a month, assuming you agreed to a two-year contract. That wasn’t exactly dirt cheap—it’s almost $40 in 2015 dollars. The subsequent years have seen all kinds of price wars that have pitted gyms against each other. In the New York area, where nothing is inexpensive, a chain of gyms offers a no-commitment monthly fee of $19.95. Other chains, including discount leader Planet Fitness, charge as little as $10 a month.

Bally’s was onto something and competitors proliferated, creating a sector that stood firmly at the center of the burgeoning fitness economy, for a time.

Fitness centers are a sector of the business where private equity has long played, owing largely to the business model advertised by Cher and her cohorts, from the 1980s on. At its core, the business has a lot of what an investor is looking for, especially one of the private equity variety. The key is predictable cash flow.

A gym that signs its members up for long-term contracts has a clear picture of its business. Its costs—rent, salaries for staff and instructors, equipment, and maintenance—are effectively fixed. With those contracts in hand, the gym operator also knows the revenue side, with very little downside risk. Once a contract is signed, the member is obligated to pay the monthly fee, or face a stiff penalty that’s designed to recoup enough of the money owed to make it hurt the member. Plus, that penalty can be easily modeled into the gym’s business plan.

Big gyms sprung up in cities and suburbs and were the only real game in town for the person who knew they wanted to be in better shape and were willing to take the first step. Fitness clubs were a slightly more posh alternative to the local YMCA and they were accessible. The chains installed rows upon rows of machines—treadmills and Stairmasters and rowing machines and stationary bikes. Some had pools, racquetball courts, and a basketball court for pick-up games.

These clubs introduced a component that became even more important as the decades wore on, and one that today’s clubs embrace. Shelly McKenzie, in her excellent study Getting Physical: The Rise of Fitness Culture in America, writes: “As a social center, the gym became a new kind of urban or suburban country club. Friendships and social connections were enabled because members believed that their fellow exercisers shared common interests and were likely to have a similar economic status and lifestyle.”³

The italics are mine because this is precisely how cohorts of like-minded people have formed over time, first physically on location in health clubs and gyms, and later in races. Today, many of those communities are a blend of both actual and virtual. That is, technology helps create the scenarios by which people find each other and/or deepen existing relationships formed around fitness.

And the lifestyle piece has evolved as well. Now more than ever, fitness is the lifestyle, or at least an even bigger part than it was back when folks were just starting to head to the gym after work or on a weekend.

It was a profitable business, with a perverse (in an economic sense) twist. The gyms wanted you to be just motivated enough to sign up, and then show up as little as possible. After all, they had your money. The less you actually worked out, the fewer towels you sweated on, the less water you showered in, the less wear and tear you inflicted on the machines (meaning the less often they had to repair and replace the equipment).

All of these financial elements made the gyms attractive to the handful of private equity firms paying attention to the burgeoning fitness megatrend.

Created in 1984 as a single club in Covina, California, LA Fitness tracked much of the growth of the broader fitness club business.

It remained a California company and expanded modestly, with a total of 11 locations by the end of the 1980s; it wasn’t until 1993 that the chain expanded beyond California, through a purchase of a smaller chain in Arizona. Growth accelerated then, and by 1998 the company raised money from the city’s Seidler family and others for expansion beyond its 36 clubs and 1,600 employees.⁴

LA Fitness leveraged that cash into an increasingly meaningful piece of the gym market and took on additional private equity, including from Madison Dearborn, a well-known Chicago investor. In 2011, LA Fitness acquired a slug of gyms owned by Bally, bringing its total locations to almost 550 across the country.⁵

Among the most notable forays by private equity into the gym business was the 2015 purchase of Lifetime Fitness by TPG Capital and Leonard Green & Co., a pair of well-known buyout firms. The two investors, both with their primary offices in California, collaborated before on consumer-oriented deals, including the purchase of retailer J. Crew. The firms also invested in Petco together.

The Lifetime deal came after the gym operator had gone it alone for 13 years, operating somewhat quietly from its suburban Minneapolis headquarters. The company, created by CEO Bahram Akradi, operated 114 fitness centers at the time of the acquisition, and owned a line of supplements. The company also had snapped up a series of races, including triathlons and well-known ultra-endurance contests like the Leadville 100. The company also purchased CEO Challenges, a series of races within races limited to top executives (see Chapter 8, “Work and Working Out”).

What TPG and Leonard Green saw was a company that managed to figure out how to navigate the harshly competitive world of so-called big box gyms, according to Imperial Capital’s Wood.

One of Lifetime’s competitors is surprisingly close by. Anytime Fitness is also based Minnesota and demonstrates another model that also attracted investors. Chuck Runyon, Dave Mortensen, and Jeff Klinger created the company in 2002, after working in and around the gym business, mostly giving advice on sales and marketing. Seeing the popularity of fitness centers surging, they decided to start their own.

Anytime’s twist is one that relies heavily on scale and technology. The company has more than 3,000 locations, owned and operated by franchisees. The technology element comes into play by living up to the name—the gyms are always open and members essentially let themselves in and out of the facility, with little need for staff.

And yet even without a high-touch approach, Anytime is among the fitness companies that amps up its personality as a differentiator. Consider the seven-page AFI Investor Manifesto that Runyon and Mortensen send to prospective franchisees. It describes the founders in personal terms—native Minnesotans, they have nine kids between them—and takes pains to lay out the culture of the company. Eschewing the notion that the customer is king, they list their stakeholders in the following order of importance: employees, franchisees, members, vendors, and investors/board members.

They describe a company whose success will be judged by its ROEI—return on emotional investment. Any good business school student or graduate can rattle off the Four Ps of marketing (place, price, product, and promotion). Anytime has its own four—people, purpose, profits, and play.

It’s apparently working as a motivating force. In the vein of inking the Ironman M dot on your leg, the manifesto notes that the Anytime approach led more than 1,000 people to tattoo the company’s Runningman logo on themselves. And it goes beyond enthusiasm. Anytime was number one on Entrepreneur magazine’s Franchisee 500 list in 2014. That same year, it sold an undisclosed minority stake to Roark Capital, an Atlanta-based private equity firm.

Even with that serious endorsement, Anytime talks a lot about play, in its offices and in its gyms. “Aside from alleviating stress and making the workplace more enjoyable, a playful culture stimulates creativity and minimizes the friction that builds between departments in a fast-moving company,” Runyon writes in the manifesto.

Runyon remains focused on technology as a way to stay relevant in an increasingly competitive landscape. A series of very simple PowerPoint slides he shares with investors and franchisees shows, in classic business quadrants, the evolution of the fitness industry in three chunks—2000 to 2008, 2008 to 2013, and 2013 and beyond.

Big box (New York Sports Clubs, Lifetime Fitness) and convenience (Anytime and 24-Hour Fitness) are stable. By his reckoning, the positions once occupied by “free-weight gyms, YMCA, and community centers” and Curves for Women were replaced after 2008, respectively, by low cost (like Planet Fitness) and studio gyms (SoulCycle, Barry’s Bootcamp). Moving ahead, there’s an overlay of what he calls digital growth, whereby each one of the four quadrants feels some pinch, or opportunity, from leveraging technology to gain and keep members.

Runyon’s initial technology breakthrough was the now seemingly simple use of a key fob to allow his members to gain access whenever they wanted. Now he’s got to figure out a way to use technology to serve them, even when they can’t or don’t want to show up to the gym.

In late 2015, Anytime bought Pump One, a New York-based company that provides personal training through mobile devices in the form of videos and workout programs. In announcing the deal, Runyon underscored his point about the importance of the mobile device in fitness: “It’s in the pocket of nearly every consumer. They lift it more often than a fork and, at a minimum, it’s used 50 times more often than a treadmill.”

All of this speaks to the deepening competitive environment for the fitness dollar, in the studios and beyond. While the creation, popularity, and growth of gyms from the 1980s, through the 1990s, and into the 2000s helped fuel the fitness economy, the last five years have seen a reckoning of sorts.

It’s a classic business conundrum, where among the worst places to be is the middle. Business school classes might study it as a barbell, where the bulk of the viable companies are on either end (budget offerings on one side and high-touch, high-cost products and services on the other) and a tough slog for those who are a little bit of both.

What’s emerged is a war to differentiate, fought on two fronts. The first is price. At the low end, gyms are duking it out where they have for several decades, offering a bare-bones experience. Here, Planet Fitness has emerged as one of the clear winners.

The company and its locations revel in the no-frills approach. Planet Fitness eschews pricey real estate (its Manhattan locations, for instance, are on the far west side of town, where rents are cheaper than in the center of the island) and staffs at minimal levels in order to keep costs down. There are no classes, which take up space and require costly instructors. There are only machines, and sometimes bagels or pizza the staff brings in—a far cry from the high-priced juice bars embedded in boutique gyms.

Planet Fitness has to play a relentless ground game, market by market, sometimes neighborhood by neighborhood. The majority of its members are mostly not the affluent, fitness-obsessed crowd, but rather the gym newbies who are joining a gym as a relatively low risk (i.e., cheap) effort to get a bit healthier. This crowd is totally content to show up, get on a treadmill or bike, do their thing, and leave. This isn’t a part of their social life and few are Instagramming their workout. Attrition can be high, as members either quit or graduate to a higher-touch gym.

There’s a smaller part of the Planet Fitness population that’s more affluent. For them, the cheap membership is only a part of their total monthly fitness outlay. The cheap gym membership—at $10 a month, it’s a fraction of a single SoulCyle or yoga class—is an inexpensive way to get one’s basic workout needs, a treadmill or some weights, satisfied.

While that ritzier crowd is nice to have, the Planet Fitness business model rests on the former group, the new-to-fitness crowd that so far forms a wide funnel of potential members. Even if those folks drop away at high rates every year, there are more behind them. Being the gateway to the broader fitness fix is pretty good business.

The ethos of Planet Fitness also is a careful balance between embracing the current wellness boom while rolling its eyes and allowing people to chill out a little amid the growing class of aggressively fit people. Its mission, planted right on the website: “We strive to create a workout environment where you can relax and go at your own pace without ever being judged.” There’s some action behind that pretty talk: each gym has a lunk alarm—a button activating flashing lights and sounds if anyone violates the stated prohibition on grunting, posing, or dramatically dropping weights.

Kapoor says Planet Fitness owes its success to a combination of timing and clarity of mission, wrapped in clear branding (bright purple and gold), and effective gimmicks (lunk alert, free pizza on Mondays). It was the first to unabashedly stake out a claim for the low end.

Chris Rondeau became the Planet Fitness CEO in early 2013, when Planet Fitness sold a majority stake to TSG Consumer Partners, a private equity firm. He came up through the ranks, arriving two decades earlier while in his early twenties, eventually heading operations and becoming a partner in the business in 2003.

Rondeau in 2013 launched an ad campaign around the slogan “No Gymtimidation” and provided the business case for the approach. “The stat is 80 percent of the population doesn’t belong to a health club and we really feel that [the] rest of the industry’s kind of fighting over the 20 percent, but we’re just going after that 85 percent,” he says. “So creating that atmosphere really brings them in. And when you throw a $10 price point on there, it really opens the market up.”

Going after that 80 percent also allows Planet Fitness to embrace the notion that—despite the happy exhortations of the exercise evangelists out there—showing up at the gym, especially when you’re starting, can be sort of a drag. “I always look at working out as a bit of a chore, not really a hobby in my eyes,” Rondeau says. “It’s much like mowing your lawn, right? You know you have to do it. You don’t want to do it. So the light-hearted approach with the purple, yellow colors, with the lunk alarm on the wall, it makes it a little bit more fun [inaudible] to come in.”⁶

By June 2015, Planet Fitness was in a groove, and sought to capitalize on its own success and a clear appetite among investors for fitness-related companies by filing to go public. In its papers, it revealed it had 7.1 million members in the United States and just fewer than 1,000 locations. On the basis of members, it claimed to be the biggest company of its kind.

Revenues for the previous year were $279.8 million, up 32 percent from 2013, quite a healthy increase. The bottom line showed that even the business of sweating on the cheap was profitable. The filing showed adjusted income for 2014 of just over $100 million, versus $71 million the previous year, a 40 percent gain.

The second way to differentiate favors quality over price, aiming to capture a customer who’s willing to pay more for something special. This is where Equinox sits. Members pay multiple times, sometimes ten times, what a Planet Fitness or other discount-oriented gym commands. In New York, Equinox charges upwards of $150 a month, versus rates as low as $10 a month for the low-end centers.

At the high end, it’s an arms race for the best new classes, the best instructors, the best equipment, and the coolest facilities. In big cities—and Equinox is only in big cities—the high-end gym evokes a cachet normally associated with expensive cars or resorts. Their ads, some of which cover several stories of a building, evoke a sexy, mischievous lifestyle. Gorgeous, fit people in states of undress, confessing, “Equinox made me do it.”

Equinox has emerged as an emblem of urban, affluent fitness by virtue of its price tag and its location. And location is the key word in understanding what Equinox is all about.

It’s yet another gym concept with private equity roots. North Castle bought the then-nascent New York City company in 2000. With 11 locations in and around Manhattan, Equinox had a loyal but limited following. Unlike bargain gyms, which can open relatively quickly in a strip mall, each Equinox facility requires substantial planning and investment. Under North Castle’s ownership, Equinox increased its footprint, nearly tripling the number of clubs and doubling membership. Expansion took Equinox to other wealthy urban areas, including Chicago, L.A., San Francisco, and South Florida.

That put Equinox squarely in view of consumers and investors who were noticing the increase in interest in fitness. Well-educated high earners were flocking to a healthier lifestyle and in the most influential corridors of the trend-setting U.S. cities, Equinox popped up.

Five years later, what might have seemed like an unlikely buyer emerged. Related Companies, the real estate developer famous for buildings like the iconic Time Warner Center at the southwest corner of Manhattan’s Central Park, picked up Equinox for $505 million, providing North Castle and its investors with a return of more than double its original investment, according to published reports.⁷

The deal came as Related’s ambitions were accelerating. Billionaire founder Stephen Ross (also the owner of the NFL’s Miami Dolphins) made his name and his money largely in New York but also by thinking more globally. Ross came to know Equinox intimately initially as a board member after being introduced to the company’s CEO Harvey Spevak through, naturally, a personal trainer who worked with both men. The trainer knew of their shared history at, and love for, the University of Michigan, where the business school bears Ross’ name.

What Ross and Jeff Blau, his protégé and successor as Related CEO, saw was an ability to marry their property expertise with the fitness megatrend. “The biggest constraint to growth is real estate,” Blau says. “There are no 40,000 square-foot boxes lying around. You either provide the real estate or you have to go get it.”

The Related-owned Time Warner Center and some of its other properties in cities like Los Angeles featured high-end shops and restaurants. Here was a chance to place one of the highest-end exercise offerings in its commercial and residential buildings. “Our markets overlap exactly,” Blau says of Equinox. “That’s not a coincidence. The demographics are the same.” With Equinox, Ross and Blau created the ultimate amenity for its residents. Surveys of residents showed the number-one amenity they were willing to pay for was high-quality fitness. “No one really likes to work out in private,” Blau says. “A room with two treadmills is not attractive.” The same desires apply to well-heeled workers in its buildings and visitors, who often lived in one Equinox city (the chain expanded to Toronto and London) and took business or leisure trips to another.

With that in mind, Equinox said in early 2015 it was creating a line of branded hotels, the first of which would open in New York in 2019 (with Los Angeles scheduled for a year later). The New York Equinox hotel would be a part of Related’s massive Hudson Yards development on Manhattan’s west side. The hotel is meant to house Equinox’s largest-ever facility (at some 60,000 square feet), built from the ground up. The rooms and restaurant will cater to the Equinox lifestyle—which favors food that’s either healthy, or, if not, smartly sourced and assembled (chocolate cake with organic ingredients).⁸

Equinox CEO Spevak said at the time of the announcement that 95 percent of his members surveyed said they’d stay at an Equinox hotel, a demonstration of their affection for the brand—and their desire to be associated with it in other aspects of their life. “We are appealing to the discriminating consumer who lives an active lifestyle and wants to have that as a hotel experience,” Spevak said.⁹

From the beginning, Equinox catered to a clientele who increasingly saw working out as more lifestyle than activity, and felt good identifying themselves with what emerged as a luxury brand for fitness.

One of its seminal moments—and a reflection of just how much fitness had solidified its place in the modern lifestyle—came at the depths of the global recession in 2008 and 2009, Spevak notes. Observers worried aloud, and competitors hoped, that Equinox’s pricey membership would be a luxury that the skittish affluent would ditch amid belt-tightening. It didn’t happen.

“Everyone in the market was playing to survive,” Spevak says, “And our average usage went up. We saw our members staying with us. They consciously cut back spending when the recession hit, but health and wellness still remained a financial priority in their lives.”

With Related’s blessing, Equinox secured new leases to take advantage of the soft real estate market. Inside the clubs, managers made sure not to skimp on maintenance or cut classes, even as slightly lower revenue squeezed margins. Equinox struck a deal with Kiehl’s to offer high-end soaps and lotions in the locker rooms.

Part of the appeal is a combination of personalization and innovation. Equinox offers personal training, as well as group fitness. For the latter, it’s constantly trying out new concepts, creating a boutique feel that gives members a first look of sorts at what might be the next cool exercise concept at any given time. (One such concept, known as Speedball, is discussed in Chapter 4

Equinox saw the boutique fitness craze coming early, and its management and owners realized that not every concept could be simply tucked in as a class. So when a singular indoor cycling program went up for sale, Equinox bought it. (One of the advantages of Equinox’s position and success is that any banker thinking about selling a fitness asset puts Spevak or a member of his team on the call list for a pitch.)

To the passerby, SoulCycle and Equinox aren’t obviously related, but an eagle-eyed urbanite might notice that a lot of Equinox locations have a SoulCycle studio right next door. It’s not a coincidence. The whole building’s probably owned by Related.

SoulCycle began as a cult-like following of women on Manhattan’s Upper West Side back in 2006 in a small single studio with a couple dozen bikes. By the time Equinox came calling, SoulCycle’s pair of founders had expanded to six studios in Manhattan, Westchester, and even in the Hamptons—the summer playground on Long Island for many of SoulCycle’s New York City-based devotees.

Keeping SoulCycle’s brand distinct has proved wise. (Equinox’s purchase of SoulCycle followed a similar deal for Pure Yoga, which also kept its separate brand identity and similarly co locates at numerous Related properties.) Even with increased competition from boutique fitness offerings, SoulCycle has a rabidly loyal customer base.

SoulCycle is like Planet Fitness—it’s clear in what it wants to be, and for whom. SoulCycle classes are meant as sweaty meditations, complete with candles and mood music (even if the mood is sometimes best expressed through a mix of only Taylor Swift songs in honor of a regular’s birthday). Despite its appeal to a customer who tends toward the hypercompetitive in many aspects of her life, SoulCycle strives to eschew judgment.

Keeping it separate also allowed Equinox and Related to exploit SoulCycle’s brand and profits, notably through an initial public offering announced in mid-2015.

The filing put hard numbers on what any SoulCycler already knew based on her own spending—SoulCycle is a cash machine. Despite being in the Equinox family, SoulCycle doesn’t sell memberships, opting for the more lucrative per-session model. That means it pulls in an average of $34 per 45-minute session. Per rider.

By the time it filed for its IPO, the company had expanded to 38 studios, with about 300,000 unique riders. That translated to revenue of $112 million in 2014, up from $75 million in 2013 and profit of $25 million, versus $18 million the year earlier.

While the workout is the thing, SoulCycle also plays to its riders’ affinity for high-end apparel—there’s a tank top that will set you back $52— and bottles of water and cycling shoes. Dedicated riders bring their own shoes; others opt to use loaners, making it feel a little like a post-modern, fancy, sweaty bowling alley.

But dingy it is not. One morning, I arrive for a ride at a studio in a Manhattan neighborhood wedged between Union Square and Times Square. I’m a guest of CEO Melanie Whelan, then the recently promoted CEO, who has offered to ride and then chat. The lobby is gleaming white, evoking a South Beach hotel reception area, and heavily populated with fit, mostly female staff, who get me checked in and toured around. There’s a unisex locker area, with well-stocked gender-specific showers and changing areas in either direction.

Inside the room, there’s a distinctly New Age vibe, right down to the candles. Instructors attend Soul University and are wont to sprinkle their sessions with talk of destiny and tips and tricks for becoming a better you. While it’s a lot about the body—in addition to the cardio, each session features some upper-body work—SoulCycle’s among the modern exercises trained on the mind, as well. Our instructor, Lauren, tells us this will be the hardest thing we do all day, pushing us to stay in the moment, moving around the room to adjust the form of newbies like me and to cajole the regulars she knows by name.

This cocktail of sweating and ad hoc life coaching won SoulCycle a rabid following and, like Equinox, it actually gained traction with its audience through the recession, spending on upgrades and expansion even as business slowed. Whelan says, “It was interesting to see Harvey invest in that moment, and SoulCycle did the same thing,” Whelan says. “With SoulCycle, there was a real sense that there was more than fitness—some said it was therapy combined with the sense of community.”

Whelan worked for Barry Sternlicht as an analyst (on the Starwood Hotels corporate development team) and then for Richard Branson, on the launch of Virgin America. Moving to Equinox in a business development role for Spevak, she was an architect of the SoulCycle acquisition. She jumped to the company to lead, build, and run SoulCycle’s operations, and was promoted to CEO in mid-2015.

Echoing Jesse Du Bey talking about Ironman and music festivals, Whelan says SoulCycle is deeply focused on what happens to the rider from the moment she enters the studio. “We create experiences, every hour, on the hour,” she says. “We create evangelists, not just riders.”

SoulCycle’s ultimate success may lie in its ability to keep that experience not just fresh, but relevant to a consumer who’s proven to be fickle. That’s where the notion of not just service, but community, comes in. “We’re about the pack, the tribe, the posse,” she says. Her opportunity—and challenge—is to keep growing that very lucrative tribe.

All of this accrues to some extent to Equinox’s mission—and bottom line—given that it stood to make money on the IPO. It’s clear that the upper end of the fitness spectrum is a profitable place to play. Equinox also sees opportunity on the other end. The company started the Blink brand of gyms in 2011 because Spevak saw a need for “a traditional gym that’s not intimidating and not expensive,” he says. “Blink gave us that value-based offering, but still had top-of-the-line equipment and a clean environment.”

As any MBA student worth their tuition will tell you, the middle is often the toughest slog. With Planet Fitness at the low end and Equinox at the high, those in the middle are stuck in a state of in-between. Unable to compete successfully on either price or quality, they end up fighting on both fronts, often with middling results.

That’s been the case of Town Sports International, which operates clubs under their city names (New York Sports Club, Washington Sports Club, et al.). The stock symbol (CLUB on the Nasdaq) speaks to its status as among the first to identify the trend. But it’s clear from the stock price that while concepts like SoulCycle and Planet Fitness are ascendant, the in-between is proving tricky.

“The middle tier is suffering,” says Kapoor, who has followed the recent history of Town Sports closely, in part to gauge how it and its peers play against either side of the barbell. “Planet Fitness had made it hard for everyone else.”

That’s largely because for many years Town Sports had a nice business with higher rates, up around $70 a month, and little competition from below. They were willing to cede the ritzy customers to Equinox but not the more cost-conscious. As competition increased, Town Sports suffered in the eyes of investors.

From a high of $14.71 in late 2013, Town Sports was bottoming by late 2015, trading at around $1.18 a share. Its market capitalization was a mere $29 million at that price. Activist investors, stockholders who buy stock and then agitate publicly for a change in management and strategy, were swarming. One such investor, Patrick Walsh, stepped in as executive chairman after forcing the CEO out.

Town Sports’ new strategy is to essentially abandon the middle and go simultaneously for each end of the barbell. The company converted about 100 of its 125 clubs to offer a budget, no-contract membership for as low as $19.95. For that you get use of the facilities and barely a towel (for a time, towels weren’t included in the lowest-end membership, causing a mini-uproar).

On the other end, Town Sports launched a line of boutiques called BFX, starting with locations in the Financial District and Chelsea neighborhoods of Manhattan, and then expanding to Boston’s fancy Back Bay. The boutiques are focused on group fitness almost completely. All the machinations lead Kapoor to say: “Even they’re saying, ‘There’s no room for the middle tier.’”

Then there’s the more radical approach, which rejects some of the underlying premises of a gym all together.

One of the recent, persistent, and controversial voices in fitness belongs to a crowd that intentionally seeks to undermine the traditional gym business at every turn. Bring up the notion of fitness fanatics and you’re more likely than not to hear the name CrossFit.

That’s in part owing to the upstart method’s relative ubiquity and rapid growth. As of mid-2015, there were upwards of 7,000 CrossFit affiliates, from only a couple dozen a decade earlier. There are the CrossFit Games, where regular people—or as regular as you can be and still compete in a national fitness tournament—vie for the honor of being crowned Fittest on Earth.

For the uninitiated, CrossFit has the characteristics of a religious movement, right down to the fervent believers who are alternately evangelistic, defensive, and dismissive. More than most fitness crazes, CrossFit has spawned both disciples and critics. It’s created a mini-economy of its own.

CrossFit isn’t a chain, but a method, and one that’s essentially franchised through training. Box operators buy a license to use the name, then go through a series of workshops that qualify them to run sessions at their location. Essentially is a key word here. A 2013 story in Inc. magazine captured it this way: “It’s neither a wholly owned chain of gyms nor a franchise, but the nucleus of a sprawling worldwide network of entrepreneurs.”¹⁰

While other brands maniacally control their logo, CrossFit is fairly loose with most everything beyond its name and its brand, which it defends fiercely. (Its mascot/logo is affectionately known as Uncle Pukie.) The brand protection has its roots in the cost of ubiquity. The lawyers are paid to ensure that CrossFit never goes lowercase, like escalator (a name coined by the elevator company Otis), or ping-pong, or, to use an example in the fitness world, spinning. If CrossFit ever becomes crossfit, the sprawling worldwide enterprise is largely doomed, at least from a revenue and profit-making perspective.

Pay attention on a trip through your town or on a road trip and you’ll see CrossFit boxes wedged into strip malls and in stand-alone buildings. The bare bones nature makes it easy to turn most any open space into a box. All this simplicity comes at a cost, and lest you think CrossFit is a discount operation, some boxes charge upwards of $300 a month for unlimited use, making them more expensive than high-end gyms like Equinox.

The relative freedom the box operators enjoy extends to their pricing. That’s largely because CrossFit gets paid the same, regardless of how big your box is, or how many people you attract. A box near Wall Street in lower Manhattan that limits its session sizes to eight participants charges on the high end; a box across the East River in Brooklyn in a more modest space and with less restrictions on class sizes charges about $150 per month.

CrossFit created a system whereby they make their money up front, through training and licensing fees and then turn their affiliates loose to create their own business arrangements.

Devotion to CrossFit runs deep, and lots of CrossFitters pull their average visit cost down through frequent sessions, with hard-core aficionados going daily. As with other activities and studios, CrossFit encourages and cultivates community, with regulars showing up at the same sessions.

Many of them choose CrossFit because it’s the anti-gym and take it a step further—they see it as a condemnation of a fitness system headed for extinction. They point to the race-to-the-bottom price wars as the best evidence.

What’s implicit in the economic one-upmanship is that some sizable portion of the gym-going population is pocketbook-driven and will ultimately view the local big-box scene as commoditized. Whatever loyalty remains is based on either an actual contract—signed to ensure the lowest possible price—or geographic convenience. Absent or diminished is loyalty based on the instruction or the instructors themselves.

That’s where CrossFit wins, on multiple fronts. It’s created something that has both an increasingly recognizable international brand, with the critical element of locally facilitated personalization and community. CrossFitters are buying in to both the overarching methodology and their own special twist on said methodology. To use a more a traditional analogy, they have fealty to both the religion and the parish.

Detractors, and even some supporters, refer to CrossFit as a cult and the workout as a spiritual experience. That’s a common theme across much of the fitness landscape (hello SoulCycle). Fitness also has crept into a personal and social space once occupied by organized religion, and it’s not just yoga studios and meditation clubs. It’s got a lot to do with the Millennial crowd, which is abandoning or never even showing up to churches and temples in unprecedented numbers.

It’s important first to understand where some of the most dedicated souls congregate, and that’s in the boutique studios that collectively are the most dynamic and fascinating corners of the new fitness economy.