Company Profile

COMPANY:Y7 Studio

2018 INC. 5000 RANK: 80

HEADQUARTERS: New York City, NY

YEAR FOUNDED: 2013

2017 REVENUE: $5.6 million

3-YEAR GROWTH: 4,022%

EMPLOYEES: 300

Sarah Larson Levey is yoga's newest mogul, and maybe its most unlikely one. "This all came about because I actually hate yoga," Levey says of her five-year-old company, Y7 Studio, which has eight locations in New York City, two outposts in Los Angeles, and plans to expand to at least two more cities by next year. In its modish studios, young urbanites strike ancient poses by candlelight as hip-hop thumps through speakers and infrared heaters ensure everyone works up a good sweat. Y7 stands at No. 80 on the  2018 Inc. 5000.

Levey, 31, swears she had nothing like this in mind when she and her then-fiancé, Mason Levey, started offering pop-up classes in Brooklyn's Williamsburg neighborhood in the summer of 2013. She was motivated by the many unsatisfactory yoga classes she'd taken since moving to New York from Michigan. Too often they featured endless chanting or confusing terminology or bright lighting and mirrors that made her self-conscious about her body. Her irritation level maxed out after one instructor spent 25 of the 60 minutes hawking a retreat she was leading in Bali. "I was like, 'Are you kidding? I spent money to be here!' " Levey recalls. 

She was ticked off enough to scour Craigslist for a cheap space where she could hold small classes with instructors willing to lead according to her specifications. She wasn't looking to make money. She just wanted to find a few like-minded yogis to help defray the cost. Those first classes, held on weekends in a disused recording studio, were so popular that by the fall she was confident enough to sign a month-to-month lease on a tiny studio of her own. At 300 square feet, it was barely big enough to fit eight people.

But one of her regulars happened to be Mary Biggins, a co-founder of ClassPass (then known as Classtivity), a service that allows users to attend classes at various boutique gyms. Biggins signed Levey up as one of her first partners, and by the following April, Levey was selling out so regularly she needed a bigger space--and realized she had a genuine startup on her hands. In January 2015, Y7--the name is inspired by the body's seven chakras, or energy centers--opened its first pop-up studio in Manhattan. Soon after that, Levey and her husband, who have known each other since high school, quit their day jobs. Since then, it's been nothing but namaste.

A fashion account executive before she turned full-time entrepreneur, Levey's day job was to help interpret that season's new trends for wholesale buyers and sell upcoming collections. In launching Y7, she's riding one of the biggest trends going: the rise of boutique fitness. More than 61 million Americans visited a health club of some sort in 2017, according to the International Health, Racquet and Sportsclub Association. That's a 6.3 percent bump from the previous year and a 33 percent hike from a decade earlier.

More than the data, Y7 is emblematic of the new type of gyms that consumers have switched to over that decade. While membership in traditional multipurpose gyms has been flat to down, patronage of boutique chains like Club Pilates (owned by Xponential Fitness), SoulCycle, Pure Barre, and Orangetheory has been growing at double-digit rates. This, even though boutiques often charge more for a single class--typically $15 to $35--than some gyms charge in monthly dues.

"This all came about because I actually hate yoga."Sarah Larson Levey, co-founder, Y7 Studio

For that, boutique fitness companies such as Peloton (No. 97), which sells high-tech spin bikes and live-streamed spin classes to people too busy to get to an actual studio, can thank an even bigger trend. The notion of wellness, however you define it, as the highest aspiration for consumers has invaded just about every aspect of American life, from the foods we eat to the way we work, play, and even sleep. Demand is accelerating for products and services that help consumers feel like they're living their best, healthiest lives.

And when a trend meets a wave of rising demand, entrepreneurs will be there to surf it. "We're seeing a lot of dollars that would've been entertainment dollars," says Anthony Geisler, CEO of Xponential Fitness, an umbrella company whose brands include Club Pilates (No. 95), CycleBar (spinning), StretchLab (assisted stretching), and Row House (indoor rowing). Xponential's MO is to buy small chains in fitness sports that are beginning to catch on and scale them up. When it acquired Club Pilates, there were fewer than 30 locations. Xponential has since sold more than 800 franchises.

Beyond the wellness movement, Geisler sees three key drivers of the boutique boom. You could call them the three C's: consistency, community, and constraint. Consistency is at the heart of any chain's appeal; like Levey, who was frustrated by how all-over-the-place yoga classes could be in their approach, consumers want to know what to expect from a business, no matter which location they enter. Geisler, a fan of Starbucks, makes sure that in all his studios little things like the layout of the bathrooms (and the free toe socks at Club Pilates) don't vary from one location to the next.

Community is the social aspect of working out. Exercisers want to get some of the same feeling they get from going to a cool bar or nightclub. The candlelight and loud dance music at Y7 certainly create a club vibe, but Levey says the rigor of the sessions themselves is what inspires bonding. "There's a sense of camara­derie," she says. "You're going through this difficult workout together."

A sense of shared affinity helps explain why people will pay more for membership at a single-purpose boutique than they would for a full-featured, big-box gym. "People who have dogs go to dog parks. Why?" asks Geisler. "Because everybody at the dog park has a frickin' dog. We're animals. We like to go to the watering hole together."

And we prefer the most popular watering holes. Hence, another aspect of boutiques' unlikely appeal: constraint. Small studios make for small classes that fill up fast, and when classes are frequently booked up or oversubscribed, it's a lot easier to charge $25 or $35 for a spot. "Look at the old nightclubs. People waited in line for hours," says Geisler. "Everybody wants to be part of that."

But not everybody has time. Peloton's founder, John Foley, had worked at Barry Diller's IAC, Barnes & Noble, and Evite when, in 2011, he found himself getting frustrated by how hard it was to get a spot in a spin class. In Manhattan, where he lived, SoulCycle and Flywheel classes led by popular instructors were often booked up a week in advance. "I was thinking, if 2,000 people want in and only 50 people can get in, that, to me, screams distributed technology," he says. 

Foley's main difficulty was convincing Silicon Valley venture capitalists of the demand he knew existed; given their cushy schedules, most of those he pitched didn't understand why anyone would work out at home rather than go for a long ride in nature. But, after finally raising the money he needed, the rest was comparatively easy. Since 2017, the number of Peloton subscribers paying $39 per month has reportedly jumped from 100,000 to 600,000--despite the bike's $1,995 price tag.

While he never doubted Peloton would be a hit, even Foley has been surprised by the strength of the community that has grown up around it. Users compete on leaderboards against others taking the same class and can hold private video chats or award one another digital high-fives. Many talk in Facebook groups, where they sometimes make plans to meet in New York at the Peloton studio for live classes. 

Despite these occasional meet-ups, the majority of cyclists take on-demand classes rather than live ones. Just as consumers have been trained by Netflix to expect their media "where you want it, when you want it," Foley says, the idea of a gym class you can take only at the time it's offered will become a relic as internet-enabled home-fitness options proliferate. Peloton already has a second product, a smart treadmill you can use for group runs or as part of mixed training.

One of those Peloton customers is Todd Wolfenberg, CEO of Yoga International (No. 122). A print magazine in the mid-1990s, Yoga International radically reinvented itself in 2013, dropping print and becoming a subscription-based platform for online yoga classes. The result: a dramatic turnaround for a company that was on the brink of extinction. "Riding it out was not an option," says Wolfenberg. Now Yoga International can claim more than 300,000 members, many of whom pay $14.99 per month to access everything from introductory courses to teacher-training videos.  

Whereas Peloton is pitched at people who would join high-end spin studios if they had the time, Yoga International is the inverse. The age of its membership is concentrated between 35 and 50 (boutique studios skew younger), and it attracts members from rural areas, where yoga studios are scarcer. Yoga International's fitness programming tilts toward low-intensity mindfulness and therapeutic practices. 

But it does have one big thing in common with Y7: inclusiveness. Wolfenberg says at-home, over-the-internet yoga instruction attracts a clientele who feel excluded by mainstream yoga culture--people who, like Levey, might find themselves feeling terrible in all those mirrored studios. "You look at the yoga magazines, and they're all skinny white girls on the cover," he says. In its media and marketing, Yoga International is careful to showcase a wide variety of body shapes and ethnic backgrounds to convey the message that this brand of yoga is for everyone. 

What if you want the convenience and customization of on-demand instruction but also happen to like face-to-face interaction? That's the formula behind GymGuyz. The Plainview, New York-based franchiser is the brainchild of Josh York, a personal trainer turned entrepreneur with the manic vibe of a Tony Robbins-type motivational speaker. "I've got more energy than anyone you've ever known," York says. 

In 2008, York was living with his parents and trying to build up his personal training business when a client told him, "It would be great if you could come to my house, but I don't have any equipment." Light bulb! He got his hands on a van and spent his last $1,000 filling it with weights, resistance bands, and other gear. His motto: We bring the workout to you. "We've done workouts in parks, pools, pizzerias, parking lots," he says. 

In 2014, GymGuyz started franchising. It now has more than 200 outlets across 30 states. The low overhead--a van and 365 pieces of equipment--has made it one of the fastest-growing franchise brands in the U.S. "People want convenience," York says. "Why is Amazon doing so well? They're doing what the customer wants. Everything is continuing to be about convenience, and that's never going to stop."

It probably won't. But Levey is demonstrating that community can trump convenience if the group experience is compelling enough. That's why she works hard at making sure everything about Y7 instills a sense of belonging and together­ness. "People are craving a physical connection to a space that hasn't been available in traditional gyms," she says.

Until just a few months ago, if you went to one of Y7's studios, there was a chance Levey might be there to greet you. In getting her business off the ground, she has done it all herself, from being a receptionist to managing payroll to hiring instructors to painting the entire SoHo studio. "I worked my last front desk shift last year," she says. "My director of operations was like, 'You can't do this.' " Having gotten an infusion of private equity money in late 2016, the company now has 300 staffers, ensuring Levey doesn't have to answer phones unless she wants to.

There's only one job Levey has never allowed herself to do: teach a class. Although she has the necessary certification, it's important to her to always see the enterprise through her customers' eyes, so she never falls into the trap of putting the company's interests ahead of the clients.' "I am the client," she says. "To me, that's our business advantage."

She's not just her own client. Notwithstanding her claim that she's "not your typical fitness person," besides taking four classes a week at Y7, Levey is a regular at New York Pilates and ModelFit. Levey the entrepreneur can't quite believe how she's been swept up as a customer by the boutique fitness wave. "If you had told me I would be paying $35 for a workout class," she says, "I would have laughed in your face."

From the September 2018 issue of Inc. Magazine