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Volume 21 No. 27
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Tough Mudder sees a fit in gyms

Obstacle race operator Tough Mudder will launch a chain of fitness boutiques in the U.S. in 2017, co-founder and CEO Will Dean said, seeking new revenue streams and an expanded brand footprint as race participation growth slows.

We believe there’s big opportunity in the studio fitness space outside of the major markets of New York and Los Angeles, for something that gives functional fitness, delivered in a consistent, high-quality and safe environment,” Dean said.

Dean said he thinks Tough Mudder gyms would fit easily into the landscape in small- and midsized markets, which, he said, research shows are mostly served by traditional all-purpose gyms, CrossFit franchises and yoga studios. “We think there’s a lot we can do there,” he said. The appeal is more limited in the largest cities, where other specialized, lifestyle-branded studio gyms proliferate.

Tough Mudder may seek a partner to scale the gym line. Further details and plans won’t be disclosed until a January launch, but Dean personally is spending “almost half” his time on the gym initiative.

Seven-year-old Tough Mudder was one of the top beneficiaries of the early 2010s-era explosion in participatory fitness events in the U.S., claiming 550,000 annual participants by 2015. But further growth has been more challenging, with North American participation rates for its core product — the untimed, 10- to 12-mile team obstacle course — staying flat in 2016, Dean said. Most of the company’s new revenue this year has come from the Tough Mudder Half, a short-distance version bolted onto the original race at the same venues, and from expansion in foreign markets. Its chief competitor, Spartan Race, also has made similar strategic shifts.

The specific markets targeted by Tough Mudder and the overall scope of the gym line remain unknown, and Dean indicated research and development continues. But the company’s own legal bills offer some proof of consumer demand. Lawyers issue on average 200 cease-and-desist letters per month to entities promoting “Tough Mudder training” classes without permission, Dean said. Tough Mudder has licensed its name to the Virgin Active gym franchise in the U.K. for its “Mudder Maker” class, but this would be the company’s first retail operations in any market.

If successful, the gyms could become a big contributor to Tough Mudder’s strategic goal of relying on entry fees (about $130 for the full-length race) for only half its revenue. Today entry fees account for between 70 and 75 percent, Dean said. The company is trying to build a digital media and sponsorship business as well, signing a three-year sponsorship deal with shoe brand Merrell in late 2015 and content deals with both CBS and CW networks this year.

Dean said the facilities probably will sell monthly passes or offer pay-as-you-go prices, and be marketed as “welcoming and unpretentious,” and accessible to all genders.

The gyms also would support other parts of the business, he said. They can serve as a showcase for sponsors like Merrell, and as a retail channel for event entry tickets.