Hair Cuttery backs indoor cycling chain preparing to take on SoulCycle


Marc Caputo, founder of Zengo, at its 14th St. NW location. (Matt McClain/The Washington Post)
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I am drenched in sweat, pedaling furiously on a stationary bike, one of 45 or so people crammed into a dark, mirror-lined downstairs club, full of women half my age and pulsating with a thundering bass.

This is “fun”?

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

It’s part of my research for this week’s column.

My mind veers toward a book I have been recently reading about 16th-century torture. It’s history, trust me. This 45-minute class is supposed to be about the experience, but the experience is a bit painful.

I keep looking at the Fitbit around my wrist for how much time remains.

A good, heart-pounding workout is part of the attraction of Zengo, a Bethesda cycling studio founded by Marc Caputo in October 2011. Enough people keep coming back that Caputo and his two business partners are preparing to expand Zengo throughout the Washington area and then beyond.

His partners know something about how to expand a business. Dennis Ratner is a co-founder of Vienna, Va.-based Hair Cuttery, the nationwide chain of 1,000 hair salons. Streetsense Capital is run by Dennis Ratner’s cousin Marc Ratner. It is a privately owned firm that invests in retail, hospitality and real estate.

The three partners have big dreams for Zengo. So far it has two studios, one in Bethesda and another in Logan Circle, both of which Caputo said are profitable. A third studio is set to open this year in another neighborhood that is rich in discretionary dollars: Fairfax’s Mosaic District. Two more metropolitan Washington locations are in development.

You don’t partner with the Ratners unless you are thinking big. Zengo Cycle expects to spend upwards of $10 million in the next three to five years, opening as many as 30 studios up and down the East Coast.

Zengo’s expansion is likely to be a preemptive strike against SoulCycle, the New York-born chain with a cult following. SoulCycle has done for indoor cycling what Greenwich Village’s Magnolia Bakery did for cupcakes. Cycling studios have become the rage with their “performance art” instructors and with celebrity clients that include Tom Cruise and Chelsea Clinton.

SoulCycle is planning to open its first studio in Washington this summer.

“Obviously, we are very, very hyper-aware of it,” Caputo said. Caputo thinks that if Zengo establishes itself early, it can benefit from the buzz generated by SoulCycle’s entry into the market.

Caputo, 47, was a financial manager in Owings Mills, Md., just outside Baltimore, when he discovered indoor cycling on a trip to Los Angeles around 2009. He was trying to lose the 50 pounds he had put on after an operation.

“I went to an indoor cycling studio in Santa Monica that was just completely different than any other traditional cycling class I had been to,” he said. “It was in a warehouse. It was dark, fun. There is something very liberating about being out in a dark room where you can truly lose yourself in the music and the rhythm. It is as much the mental release as the physical experience.”

He returned home and began to investigate the business possibilities. Part of the impetus came from the turmoil in the financial markets, which had decimated the incomes of financial managers like Caputo.

He visited gyms, talked to instructors and worked his network, including friends in Washington’s wealthy suburbs of Potomac, Bethesda and Rockville. He asked them what they knew about cycling and who were the best instructors.

He leaned toward Bethesda because of the wealthy demographic profile. Caputo wanted to stay away from the more expensive rents in what he calls New Bethesda, or Bethesda Row as it is commonly known. He found a downstairs retail space in the northern end of the suburb’s business district, across Old Georgetown Road.

“The rent was right, the location was great. Two thousand new residential units are going up within a six-block radius in the next three to five years,” Caputo said.

He used his own money and raised some from investors for the $300,000 it took to open. He bought 45 bikes at $2,000 each. He put in lockers, toilets and a $10,000 sound system that was later upgraded to a $40,000 system. He also spent heavily on the air conditioning to remove the heat that 45 riders generate in a 900-square-foot space.

To generate traffic, he gave away classes. He looked for people of influence, from a gastroenterologist to a Lululemon store manager, and invited them to try Zengo free and bring their friends.

By Thanksgiving 2011, Caputo knew he would be successful; the studio had sold out two classes. By the fifth month, the company was cash-positive.

Zengo’s studios vary in cost because of real estate, but they generally range between $300,000 and $500,000 to build.

Zengo’s classes at Bethesda cost on average $18 for just under one hour of cycling. Customers buy Zengo credits online or in the studio. Price varies with the number of credits/classes purchased. One credit/class, for example, is $22 while 30 credits/classes cost $510, or $17 apiece.

Caputo said Bethesda averaged around 4,000 “rides”— or the number of hourly customers — in March, its most successful month to date.

There is no debt, and the three partners watch costs like hawks, monitoring everything from soap and shampoo to what they spend on the build-out.

Labor is the top cost. The 12 instructors get a flat rate plus bonuses for the more seats they fill.

“We are very cognizant about the money we are spending,” Caputo said.

He met Dennis Ratner through a friend, and after a two-hour dinner at a California Tortilla in the spring of 2012, they agreed to explore the possibilities of a partnership. Over the next several months, they discussed ways to expand the business while not compromising operations. Dennis, who had built an empire with Hair Cuttery, brought in Marc, who had experience in the hospitality and real estate sectors.

“We met and sat down with Marc Ratner and said there is a good business model, no competition locally other than the gyms, and there were discretionary dollars in fitness,” said Caputo.

They hammered out responsibilities and restructured the company, buying out the original investors and dividing ownership roughly into thirds between Caputo and the two Ratners.

Dennis would supply the operations expertise, with accountants, attorneys, human resources and all the other back office operations needed to support a business with big aspirations. Marc Ratner’s Streetsense Capital would supply the hard expertise, including designs, architecture, real estate and lease negotiations.

Caputo said the thinking is “to build this locally, scale it and run it, and we might have the opportunity to expand it outside the market.”

It all comes down to keeping the patrons happy — and coming back.

“Our main job is to wow and delight our customers,” he said.

Felt more like shock and awe to me.

But you know, I felt pretty exhilarated the next day. I may give the torture session another whirl.

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