The business model of Cure.Fit

The business model of Cure.Fit – Hot it generates recurring revenue by creating a habit of exercise.

Health and fitness start-ups. Cure Fit has joined the growing list of companies offering online groceries. The Mukesh Bansal-led company has started offering grocery products as it seeks to increase frequency on its app under the name Whole. Fit, its latest app update shows.

The services are currently restricted to Bengaluru.

The new offering sees Cure. Fit join Amazon, Flipkart and the major e-grocery incumbents Big Basket and Gofers in the race to tap into the online grocery market which is expected to grow to $10.5 billion by 2023. Swingy-owned Super Daily is also in the market after starting with milk deliveries and launching Swingy Stores. 

Cure. Fit’s grocery offerings, for now, ranging from breakfast cereals and staples to instant foods — all catered to an audience that is seeking health-friendly options.

Since its launch in 2015, Cure. Fit has introduced multiple services in a bid to become a ‘super-app’ centred around better health. Starting with gyms in 2015, the company expanded to Eat. Fit for healthy eating, Mind. Fit for yoga and mental wellness and Care. Fit for primary healthcare.

They recently also forayed into fitness wear, adding one more category to its app. And now, groceries through Whole. Fit.

The vision at Cure. Fit seems to be clear: build an ecosystem of health, fitness and healthcare.

While the offerings of the company promise potential as health-consciousness spreads, industry experts question the sustainability of the business model considering the heavy capital expenditure involved, especially at a time when other CAPEX-heavy companies such as WeWork and Oyo have come tumbling down.

“Cure. Fit has been valued as a tech company rather than a real estate company which will soon catch up with it,” said an investor at a top venture capital firm, requesting anonymity. “While customer service of the company has received positive feedback, it needs to be valued as a real estate company which has a thin layer of technology.” 

Breaking down the business model of the Cure. Fit ecosystem

Founded by Myntra co-founder Mukesh Bansal and former Flipkart executive Ankit Nagore, Cure. Fit’s business model is centred around creating a connected world where customers can move through an entire chain of a healthy lifestyle including working out, healthy eating and mental health — all available at one place. The whole ecosystem runs through its Cure. Fit app.

Cult, its fitness offering, has roughly 200 centres across the country. To understand better here’s an indicative one-time cost and revenue metrics from a single centre. The company generally rents 3,000 sq ft space in commercial establishments. Unlike setting up a regular gym that requires about Rs 1.2 crore in initial investment due to heavy equipment, Cult’s single centre costs ‘only’ Rs 60-70 lakh — which includes flooring, painting and installing boxing bags, according to multiple people aware of the company’s operations.

While rentals depend on the location, the typical cost to maintain a centre including salaries and marketing adds up to around Rs 15 lakh.

“They are breaking even on a month-to-month basis at the operational level — not counting technology costs, overheads, training costs, etc,” said one of the persons mentioned above, requesting anonymity.

According to sources, the company makes around Rs 15-18 lakh from centres which are located in Indira Nagar and Brigade Road in Bengaluru. This essentially outlines that about 650-700 people have been paying every month to Cure. Fit. However, that’s not the case with centres in other locations in Bengaluru and Hyderabad.

“About 70% of Cure. Fit’s centres have less than 300 paying customers. The number further goes down in north India (Delhi NCR),” said one of the sources cited above on condition of anonymity. The real-estate cost incurred by Cult. Fit’s operations are usually high. For example, its largest centre in NCR is located in Hauz Khas in New Delhi, a prime location where it has 12,000 square ft space.

“The centre has about 1,100 members. That’s only 20% occupancy vis a vis capacity. Such a facility should have at least 5,000 members,” said the above-quoted person.

Another factor that may not work in favours of Cult is that the rental costs are locked in and can rise at a faster pace when compared to membership prices, possibly causing an imbalance in income versus expenditure in the long run.

While there are around 200 Cult centres across seven cities, the firm recently forayed into Dubai with plans to expand in South-East Asia, West Asia, Europe and North America. 

While Cult contributes a large chunk of overall revenue for Cure. Fit by its large ticket size, it is food that brings in the numbers. Eat. Fit brings in about 80% of overall users. Several of these users overlap across different offerings — which is the main idea behind the ecosystem being created by Cure. Fit.

Eat. Fit, which sells through the Cure. Fit app and through food-ordering platform Zomato, clocks about 35,000 daily orders. This is in sharp contrast to food delivery incumbents Swingy and Zomato which clock over 1 million daily orders, as per industry estimates. More importantly, even the niche positioning as a ‘healthy’ option, thanks to the association with Cult, has not translated to selling profitably.

“While they can predict orders due to the subscription model and the data they have, they are still running at a loss per order,” said another person familiar with the operations of Eat. Fit. “Per order, they are losing Rs 25 without including delivery and kitchen costs.”

The firm was running around 40 Eat. Fit kitchens as of July 2019. With Swigs recent entry into offering healthy options and an eventual expansion into home food subscription, Eat. Fit’s road to profitability seems to have become tough.

Other verticals such as Care. Fit has around five centres and there is about 31 Mind. Fit centres.

Care. Fit itself is fairly new with offers on basic diagnostic tests and the Bansal-Nagore duo have plans to add other high-end health services such as skin, hair and dental care.

Cure. Fit’s strategy: Outburn everyone

A cult has managed to create a situation where other gym chains find it difficult to compete with it on membership costs. In other words, at Cult, it is always New Year’s Day — the day most gyms offer great deals to rope in members who have made resolutions to get fitter.

This has been possible due to the large amounts of money that the company has raised over the last three years. It last raised $75 million in May 2019 at a valuation of over $500 million, less than a year after it raked in $120 million. 

“Everyone in the industry is confused and trying to figure out how the company is working. But maybe because of their high capital raise, which is around $60-70 million per year, they can afford such discounts and a cash burn of $25-30 million a year,” said a fitness industry veteran on condition of anonymity.

That said, some investors believe that Cure. Fit’s horizontal model is more of a boon than a bane.

“If Cure. Fit only ran fitness centres, then its revenues would depend on occupancy and retention rates, but with its ability to cross-sell multiple other features and products is what will work in its favours,” said another investor in this space, requesting anonymity.

“Cult is their user acquisition channel and their other offerings don’t need any user acquisition cost.”

The business model of Cure. Fit. Hot it generates recurring revenue by creating a habit of exercise.

The premise that you can become an exceptional performer through continuous practice, hunkering down for the long run and cultivating desired physical and mental habits is beguiling. Numerous experts have dwelt upon various aspects of this theme.

It is also a subject that has drawn the attention of Mukesh Bansal, a serial entrepreneur and co-founder of health and wellness start-up Cure. Fit, inspiring him to write his first book, No Limits: The Art and Science of High Performance.

Last year, we grew almost 4x and this year we grew almost two times. We don’t have any direct competition so we don’t have that much growth pressure. We are generally more focused on becoming profitable.

That will be our focus for the next one or two years. Our fitness business is quite close to becoming profitable, and we think we will get there this year. What about pressure from investors? Our investors are very happy because fundamentally, our business model is profitable, far.

We focused on making workouts fun and interesting. If you go for a Cult class, you will see each workout is unique, the trainer guides you, you are working out with other people so there is a significant social element.

There has been a lot of behind-the-scenes work to ensure the experience is consistent every single day.

There has been a lot of focus on standardisation, automation, processes and training.

 What role has tech played in all this?

Tech is big.

What role has tech played in all this?

Tech is a big reason why we have been able to do all this at scale, with quality. Today, almost all processes in the Cult are automated.

Workouts are generated through algorithms in an automated fashion, we track a lot of data about quality metrics, customers book classes through the app, give feedback through it, and they can track their habits through it.

There seems to be more awareness about mental health and.

There seems to be more awareness about mental health and its importance. Is this reflected in Mind? Fit’s business?

Yes, of course. We have about 30 centres now, and we offer meditation, yoga and one-on-one therapy. About 50 mental health therapists work with us. Stress, panic, anxiety issues are all on the rise and yoga and meditation are good preventive solutions.

We are also working on building a very strong sleep product that we will launch in six months. It is.

How has Eat? Fit, the food arm, grown?

Eat. Fit has grown a lot. Last year, it was 40% of our revenues. In the longer term, I feel Eat Fit will be a much bigger business.

You are someone who has been in the online space for a while and have seen many funding cycles – starting with the heady days of the dotcom boom in the US. Do you see investors turning more cautious in the days ahead?

Some years are easier and some are tougher when it comes to funding. Some years are easier and some are tougher when it comes to funding. But good companies don’t struggle to raise money. They find it easier to raise money in tough times because investors look at quality metrics more. They look at your unit economics and whether customers like your product.

From an ecosystem point of view, this year might be slower than last year. But if you have a good product that customers love, investors are always available. I have now been part of of the Indian ecosystem for 13 years – 2008 was slow, 2013 was slow, 2016 was slow and maybe 2020 will be a slow year. But that is okay. It is something you expect.

What about the general slowdown of the economy? Do you expect that to have any impact on the ecosystem?

I think the Indian economy will bounce back in the next 2 or 3 quarters because the fundamentals continue to be sound.

For start-up’s, it doesn’t for start-up’s, it doesn’t matter that much. You are not looking to acquire a million customers. You will be looking at 5,000. A lot of good companies get started during a slowdown. As long as you survive that time and use it to make your product better, it is fine.

We have seen a few business leaders speak out about the violence on university campuses. But there haven’t been many voices from the startup ecosystem. Why is that so and what is your view?

Entrepreneurs are busy and focused on their world. But I know a lot of entrepreneurs who express their opinion. By and large, most of them are in favour of freedom of speech and support the fundamental rights in the Constitution. I don¡¦t think entrepreneurs are any more silent than people from other sectors.