Indoor cycling puts up competition to restaurants and movies

Indoor cycling gyms, or cycling studios, where visitors use stationary cycling simulators are popular venues in the United States. In Russia, this market is only beginning to grow. Oleg Rudakov, the founder of the Rock the Cycle gym chain in Moscow and St Petersburg, explained how he turned his passion into a business and how his studio differs from a regular fitness club.

One promotion, one lecture, one businessman met at a club

Oleg Rudakov worked as an event manager and marketer and promoted the World Class fitness brand, then Bosco clothing at the Olympics in London and Sochi, and rode a mountain bike in his spare time.

In 2012, Oleg’s friend Nikolai Voronov who worked at an advertising agency offered him a job to develop an advertising concept for Tinkoff Bank based on cycling. Oleg proposed installing cycling studios at malls to advertise credit card discounts – a participant cycles for a limited time and their credit card interest is slashed by a percentage equal to their kilometer score. But the idea was never implemented.

In 2014, Oleg attended a lecture by Mikhail Kusnirovich who spoke about his business career and finally realized that he, too, wanted to start his own business.

“I wanted to give people something I value, and so I thought about my biking hobby,” the businessman recalls. “In our climate, one can ride a bike for four months a year at best, but what do cycling enthusiasts do the rest of the time? Furthermore, there were no cycling studios in Moscow at that time, and I thought it was time to take over the niche while it was vacant.”

A year later, Oleg Rudakov researched the cycling studio business in the United States, developed a business plan and showed it to Voronov. They met at the Skolkovo club to discuss what to do next, and suddenly a prominent businessman familiar to Voronov came over. He overheard their conversation, became interested and asked them if he could look at the business plan. After reading it, he agreed to invest in the project. He provided Oleg with a $300K loan for three years.

Cycling studio replaces a bank

According to his investment contract, Oleg would receive the funding only after he found a space to rent. Oleg started looking. He needed at least 250 sq m, a place where he could revamp the ventilation system, install showers and have an open room without any support columns. It was pretty hard to find a space that would meet the criteria. Cafes and shops also competed for 250 sq m and many owners refused to provide the space without a deposit.

The search took four months. The aspiring businessman searched through the CIAN property search website, personal contacts and real estate agencies. Finally, he found a suitable space to rent by the beginning of 2016. It was a space earlier occupied by a bank at 1 Tverskaya-Yamskaya Street in Moscow. It was even bigger than he needed, around 308 sq m. Oleg Rudakov signed the contract and started fixing the place. He also ordered a website for his project and created pages on social media to build a customer base by the time the studio opens. The studio opened in September although Oleg initially planned to finish preparations by May or June.

“I had no idea that the space would take so long to rebuild. We had to remove extra walls, install soundproofing, lay new floors and ceilings. The ventilation system had to be urgently fixed.”  

Outfitting cost RUR 6 mio ($85K); the rent cost RUR 500K ($7.1K) per month. Oleg also purchased 30 stationary bicycles from Technogym (Italy) and additional equipment for RUR 4.5 mio ($63.9K). Once he stopped by Technogym at GUM, talked to the store manager and found out that the management plans to buy new-generation cycles. He contacted Technogym CEO via Facebook and offered a deal. They spoke on the phone and eventually, the new businessman bought exercise machines, mini computers that measure and display physical activity indicators, furniture and other sports equipment.

While reconstructing the studio, Oleg launched a promotion campaign for the future club. He posted ads on Facebook and Instagram and offered those interested the first free visit. He also published the invite on the website and installed banners at the studio windows announcing the opening of the studio with a link to the website. By September, he already had 5,000 email addresses of potential visitors.

Oleg outsourced the development of a website, CRM and a mobile app, using which clients could keep track of their training sessions and receive statistics that was collected by a computer connected to the bicycle. It included heart rate, rotations of the pedals, speed and distance. At the same time, Oleg was searching for trainers who would be really interested in cycling and wanted to improve themselves.

Wheels up!

The very first training session was held for Oleg’s friends, who then published positive reviews in online groups. The first four months were free, but not everyone who submitted an application attended, and the studio was operating at a loss. Then Oleg began charging RUR 290 ($4) for the first session and RUR 990 ($14) for the next ones, and the company’s revenue equaled expenses (RUR 1.2 mio, or $17K). Later on, a new membership program was launched: 8 sessions cost RUR 6.9K, 15 sessions cost RUR 11.9K and 30 sessions were offered for 21.9K.

“We also launched an aggressive ad campaign,” Oleg said. “For instance, to receive a heart rate monitor, the user had to register for more sessions, or pay RUR 300. It resulted in a social media hype, which attracted more visitors.”

In 2017, the company’s revenue reached RUR 1.8 mio and net income reached RUR 400 K. However, the biggest part of it was used to pay off loans.

“I used to believe that we compete with fitness clubs,” Oleg said. “But it turned out that our competition was cafes and movie theaters. In our studio, people relax and chill the same way they do when having a glass of beer or watching a movie.”

Along with regular cycling or hand weights sessions, people also can take training sessions while watching a movie, a music concert or a video showing the planet’s most beautiful landscapes (a virtual tour); such sessions are usually held on weekends. The program also includes competitions between members as well as outdoor sessions at Minsky Public Garden located near the gym. To attend a session, one must book a gym exercise machine and a time slot beforehand.

Clients can also download the app and enter their physical parameters; during the first session, the system will calculate a client’s physical shape and offer a proper amount of exercise.

Stepping up efforts

Oleg continues active promotion of his project through social media advertising, placing banner ads and taking joint efforts with partners. He spends about RUR 100K ($1.4K) per month on advertising. In late 2017, he received an offer to launch the second gym on New Holland Island in St Petersburg on favorable terms, with the rental price of RUR 1K for one sq meter per month. In February 2018, the second Rock the Cycle gym was opened in the city; the effort required $250K, which was provided by the same investor. No repairs were required; Oleg had to purchase 25 exercise bikes only.  

Rock the Cycle gyms work on a daily basis, with five training sessions held on working days and eight on days off. The peak season usually extends from March through April, while the least number of clients is usually observed in summer. Most people choose to attends training sessions on weekdays between 6 p.m. and 9 p.m. Currently, the gym chain has about 500-600 regular clients and employs a total of 15 people including managers, ten fitness coaches, and an executive manager hired for the gym based in St Petersburg. Oleg coordinates the coaches’ work; he also hired outsourcers for the website and app support, social media marketing, and accounting. Oleg’s plans include opening another two gyms in Moscow and setting up franchise in other cities.

“I personally want to work in Moscow and St Petersburg and train my representatives to operate in regions. I do not want to simply sell training; I am planning to sell our IT resources and the accumulated experience for representatives to stay with us,” Oleg emphasized.            

By Christina Firsova

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