SoulCycle: A Classic Entrepreneurial Tale Web: www.soulcycle.com Facebook: SoulCycle Twitter: @soulcycle Bruce R. Barringer, Oklahoma State University R. Duane Ireland, Texas A&M University Introduction Imagine the following. You're in the midst of a stressful day. You have a great deal on your mind and there is a problem at work you're trying to sort out. Your phone hums to remind you of your 4:00 pm SoulCycle workout. You make the short drive to the SoulCycle studio. You walk in, and the young woman at the desk greets you by name. She hands you a bottle of water (she remembers you like Dasani). You slip your iPhone into your bag because phones are not allowed at SoulCycle. You enter the studio and pick out a stationary bike. The room, which is lit by scented candles, is dim. The spinning class begins, and you and 30 other riders pick up th class because you like the instructorJessica. She knows just when to push and when to back off. You start thinking about your problem at work, and for a while forget you're exercising. A solution occurs to you that you hadn't thought of before. Jessica brings you back with one last surge before the 45-minute session comes to a close. You leave the studio thinking that you just did something that was not only good for your body, but was good for you. Instead of feeling tired, you feel refreshed. This is the SoulCycle experience, created in 2006 by Julie Rice and Elizabeth Cutler. This is how they did it. The Blind Date In the 1990s, Julie Rice was a talent agent in Los Angeles. She became acquainted with indoor cycling, which was a stress reliever for her. It was also her social outlet in that in the Los Angeles area, people socialized around exercise. The fitness centers, and boutique studios, also tried to make exercise an experience. In the early 2000s, Rice moved to New York City. She tried to find a fitness center, but couldn't find one that met her needs. In New York City, fitness centers were just thatfitness centers. People socialized and sought out experiences in other ways. Rice eventually found an indoor cycling center, and in 2006, an instructor introduced her to Elizabeth Cutler. Cutler was also a New York City transplant, and shared Rice's frustration with the city's fitness centers. They met for what they called a "blind date" and found that they were both looking for the same thinga fitness center that not only provided a good workout but provided a way to meet people and find a little bit of community. The two hit it off and started talking about opening a fitness center of their own. Rice recalls that after their first meeting, before her taxi door closed, she had a text from Cutler. The text said, "I'm going to look for real estate, you research towels." The First SoulCycle Studio Just a few days later, Cutler found a possibility on Craigslist. It was an old dance studio on the Upper West Side of Manhattan. It was properly zoned and had a five-year sublet, so Rice and Cutler figured if their idea didn't work out, they could lease the space to someone else. They took it, and decided to open a spinning studio. Spinning is high intensity indoor cycling. They didn't have much money, so the front desk was built from IKEA cabinetry. The studio was in the rear lobby of the building, so their customers had to walk a long hallway to find the studio. They made one big mistake. It wasn't until after they signed the lease that they found out they couldn't put up a sign on the front of the building. They decided to call their studio SoulCycle. Rice and Cutler talked a lot about price. They decided to charge $28 for a 45-minute spinning session (it's now $34). They also decided to charge per classno monthly membership required. They reasoned that people value what they pay for, and if someone pays 35 $28 in advance for a spinning class, chances are they will show up for the class. They also knew the type of experience they wanted to deliver and it would take $28 per class to pay for it. To get their first customers, Rice and Cutler went door to door in the neighborhood and worked their personal networks. They also delivered swag bags to as many of the health and beauty editors in New York City they could get in to see. They were also determined that their secret saucethe thing that would get people talking about SoulCyclewould be the experience they delivered. At that time, there were no fitness boutiques in New York City, other than Yoga and Pilates studios. They were just mainstream fitness centers, some of which offered spinning as one of many classes. SoulCycle would be the first spinning boutique in the cityand Rice and Cutler were determined to nail it. The SoulCycle Experience The instructor. The SoulCycle experience starts with the instructors. A spinning class is led by an instructor, who rides a bike that faces the participants. The instructor is the pacesetter, the coach, and the motivator. At the time SoulCycle opened, spinning instructors either did it part time or picked up jobs at several fitness centers to cobble together an income. Rice and Cutler decided to change that, and hired instructors on a full-time basis. As a result, they got the best instructors and their clients got consistency. Providing instructors full-time jobswhich included health insurancealso gave the best instructors a chance to make spinning instruction a career. That greatly enhanced SoulCycle's chances to retain the best instructors. The music. A big part of the SoulCycle experience is the music. Each instructor curates a playlist for each session. Music plays during the entire 45-minute experience. The music is chosen to match the ebbs and flows of the levels of intensity of the session. No two sessions are the same, and different instructors favor different styles of music. Each month, SoulCycle releases a "best of" list of songs played in its studios that month. But the individual playlists aren't releasedyou have to be present to hear the music. The atmosphere. The atmosphere is unique. The studios are softly lit, with most of the light coming from scented candles. Smartphones are not allowed during the spinning sessions. The idea is to offer an experience that is at the same time loud and group-oriented and quiet and private. The SoulCycle experience is also conducive to making new friends. Many people have similar schedules or like the same instructor, so they see each other frequently at SoulCycle sessions. This leads to friendships outside of SoulCycle. This aspect of SoulCycle started with the first studio. Remember the long hallway? An unexpected benefit of the long hallway is that it created interactionspeople would say hello to one another coming and going from sessions, or walk the hallway together and get acquainted. SoulCycle has repeated that design elementthis time deliberatelyin many of its other studios. SoulCycle is also both technologically advanced and primitive. Both are intentional. Its stationary bikes and sound systems are state of the art. At the same time there are no clocks in the studios, there are no rankings (some spinning studios rank the riders based on who is riding the hardest), and there is no gamification. People can wear Fitbits or other devices to monitor themselves. But as far as SoulCycle is concerned, the purer the experience, the better. Everything about SoulCycle's atmosphere is intended to reinforce the experience the company wants to deliver. It wants people to have a good workout but to also find joy and contentment in the music, the soft light, the lyrics of the songs, the familiarity of the instructor, the friendships that are made, and so forth. That's the secret sauce on which the company is built. Training. Rice and Cutler knew that for SoulCycle to be scalable, they had to perfect the SoulCycle experience and make it repeatable and teachable. So they focused heavily on training from day one. New instructors go through an eight-week training program. They're in school from 9:00 am to 5:00 pm every day, and ride an additional 5-6 times per week. The employees who work the front desk, and have the most direct interaction with customers, go through the SoulCycle hospitality school. The hospitality school focuses on topics such as the history of the brand, what is customer service, how to effectively communicate with colleagues, and so forth. One staple of SoulCycle's philosophy on training is that each new hire, regardless of rank, spends time working the front desk of a SoulCycle studio. The front desk is the best place, in Rice and Cutler's view, for a new employee to experience and learn SoulCycle's culture. The Growth Years The first SoulCycle studio was a success. Within six months of opening, it was profitable and had waiting lists for its classes. Rice and Cutler thought in the early months they would service about 75 people a dayit turned out to be between two and three hundred. Via the strength of the SoulCycle experience, the company had literally created a marketplace for its product. The second SoulCycle studio opened in the Tribeca area of New York City. In the early days, people had to show up for SoulCycle classes early and put their name on a waiting list. To make things easier, SoulCycle developed the first online reservation system for a fitness boutique in New York City. It instantly became popular. Many classes would fill up within a few minutes of when their time-slots became available online. SoulCycle started selling branded apparel when its first studio opened in 2006. It added e-commerce in 2010. SoulCycle currently releases 12 private label collections per year. Pieces generally sell for about $40 for a top to $85 and higher for pants and sweatshirts. Many SoulCycle enthusiasts have multiple combinations of SoulCycle outfits. SoulCycle's early growth took place primarily in the New York City area, where it steadily added studios. In 2011, the company decided to expand to California. At that time, Rice and Cutler sold SoulCycle to Equinox Fitness. The cofounders felt they needed experienced hands involved to manage what was anticipated to be rapid growth. Rice and Cutler stayed on and have managed SoulCycle as one of Equinox's brands. Current Status and Challenges SoulCycle now has 85 locations in the United States with approximately 20,000 riders each week. It has had riders as old as 85 and as young as 12. The company employs 1,500 people and reported sales of over $112 million in 2014. Along with its continued success, SoulCycle faces a number of challenges. Companies like Peleton (www.peleton.com) now make high-quality stationary bikes that allow people to experience spinning classes at home through rich multimedia connections. The classes are available on-demand, which means that the classes are archived and you can take a class from your favorite instructor anytime you wantyou don't have to show up at a studio at a particular time. A number of SoulCycle imitators have also sprung up, and offer classes at a lower rate than SoulCycle's current rate of $34 for a 45-minute class.

Discussion Questions

1-34. Talk about the challenge that Peleton poses to Soul-Cycle. If you were asked to advise SoulCycle on how to respond to the Peleton threat, what would you tell the company to do?