Is This The Most Innovative Brand in Fitness? by Polina Marinova @FortuneMagazine January 23, 2017, 4:17 PM EST E-mail Tweet Facebook Linkedin Share icons Annbeth Eschbach isn’t scared of the fitness startups that threaten to cannibalize her business. In fact, she embraces the competition. In 2002, Eschbach was frustrated by the fragmented fitness world of gyms, health clubs, day spas, and yoga studios. She decided to unify the wellness industry by offering spa and fitness under one roof — a novelty at the time. She raised capital, pulled together a founding team, and opened a boutique studio called, Exhale Spa. Exhale has grown from one studio in 2003 to 29 boutiques in 11 markets across the U.S. today. In the last few years, the appetite for workout studios and fitness classes has exploded, and so has the competition. With barre studios such as Pure Barre, FlyBarre, and The Bar Method competing in the same space, customers have more options than ever. “The boutique fitness space has gotten extremely cluttered, extremely competitive, and I would venture to say it’s saturated and confusing,” Eschbach says. And then came a new disruptor to sort the clutter – ClassPass. The fitness startup created a universal gym membership model by partnering with studios across the country for a significantly lower price than Exhale’s annual fee ($180-$265, depending on location). Rather than resisting, Eschbach knew she had to embrace it, so she struck a partnership with the new company. “We have to be early adopters because things are moving so fast,” she says. “Check your freaking ego at the door. You may have said a week ago with absolute certainty that you believe one thing, but don’t be afraid to re-evaluate and change the plan two weeks later.” Last week, Exhale announced a partnership with a yet another new fitness startup called, Fortë Fitness. The company is an on-demand video platform that live-streams workout classes from across the globe. Yes, this company could potentially pull people away from Exhale’s physical studios, but Eschbach is willing to take the risk. To survive, she says, you must adapt. In an interview with Fortune, Exhale’s founder and CEO spoke about the need to embrace change, adapt, and plan for the future. This Q&A has been edited for grammar and clarity. Annbeth EschbachCourtesy of Exhale Fitness classes have exploded in popularity in the last few years. How is Exhale different from all the other boutique fitness studios out there? In the last five years, an insane amount of competitors have popped up. There’s 74% more barre inventory than there was a year ago in our market. The boutique fitness space has gotten extremely cluttered, extremely competitive, and I would venture to say it’s saturated and confusing. We’re really glad we’ve never been a one-trick pony. We’ve always believed in evolving and changing and learning from market demand, so we’re always introducing new experiences. If we have a full suite, there’s a bigger opportunity to commit. As the last five years have unfolded, we’ve realized that we need to emphasize our focus on both mind and body. ClassPass has pioneered this model of a universal gym membership by partnering with studios across cities. You have a partnership with them. How has that model affected your business? We have to be early adopters because things are moving so fast. Check your freaking ego at the door. You may have said a week ago with absolute certainty that you believe one thing, but don’t be afraid to re-evaluate and change the plan two weeks later. Many years ago Gilt and Rue La La [luxury shopping sites] asked if they could do a test with us. And we went, ‘Hmm, will this cannibalize our business?’ But we decided to be early adopters and test this and learn from it. It was unbelievable how that helped grow our business with an appropriate group of people. It was key in terms of new guest traffic. It all made sense. ClassPass then comes screaming into the world, and they launched with us. We decided to embrace it. For an entire year, it brought in all new guests, and we’ve learned a lot from doing that partnership. I’m currently studying the hotel industry and the way it got disrupted. Today, we sit here and we are watching these forces at work. You cannot deny them, you can’t sit around and wait for them to blow up. You need to embrace them, understand them, and figure out how to leverage them in a way that doesn’t hurt and take over your brand. We do this balancing act every day. What does that balancing act look like at Exhale? We’re focused on what is going to make the Exhale experience as valuable as it can be, so it’s a balance between being people-centric and metrics-driven. You go to business school, and you hear about how important metrics are to a business. As companies get bigger, you look at the gross profit, the cost per class, the average yield. If that’s all you’re doing in our space, no one’s going to work for you. You need to strike this balance of taking care of your people but also measuring them. We do things to support the culture that we believe is important. For example, all of our associates get complimentary classes provided the class isn’t full. And we also share a lot of metrics with our staff. Traditionally in this space, teachers and healers tend to be in front of the curtain, but we want to educate them about the metrics as well. What’s next for the boutique fitness space? You’ll see more of these exercise communities we call “sweaty societies.” We see our customers wanting to move together, detox together, and juice together. You’ll also see technology continue to play an immense role in bringing these experiences to us. With disruption comes huge opportunity. What’s one thing you wish you had known before starting your business in 2002? I wish that today I had the same fearlessness that I had back then. It is so easy to spend all of your time on risk-management, but I think that the successful entrepreneurs are the ones who see the risk and swing around it. People like to be involved in exciting, new, high-growth companies. It is important to embrace change and to look for opportunity. If you don’t do that, you’ll get left behind.