Terry McBride’s YYoga expands east

Terry McBride knows how to spot a hit: his Nettwerk label brought us both Sarah McLachlan and the Barenaked Ladies. Now he wants to roll out a national chain of yoga studios called YYoga. Is this his next big thing, or just a passing fad?

Michael McCullough 0

(Photo: Katie Huisman)

Yvon Chouinard, the surfing founder of outdoor-clothing maker Patagonia, once famously dismissed the vast majority of his fellow CEOs as “corpses in suits.” Terry McBride, best known as the co-founder and CEO of Nettwerk Music Group, can rest easy that he doesn’t fit that description. Indeed, he may just be the youngest-looking 50-something executive in Canada. He projects the puckish virility of one who wears his grown-up burdens lightly.

Without so much as opening his mouth, therefore, McBride makes a good case for his latest business venture, a chain of yoga studios called YYoga (pronounced Why Yoga). A few years ago, he recalls, he took mining magnate Frank Giustra to one of his seven studios in the Vancouver area for a class in the hopes of getting some financing. It happened to be led by a renowned visiting yogi from Hong Kong, and the room filled up with instructors and other hardbodies. A half hour later, dripping with sweat, Giustra turned to McBride to ask, “Is this how you’re going to sell me on your concept?”

But sell him he did. In January, Giustra’s Fiore Capital sank a pile of cash into the new venture, as did Beedie Capital Partners, a private equity vehicle run by developer (and McBride friend) Ryan Beedie. Together, the two invested $9 million, which will be used to open eight to 12 studios in the Toronto area. In time, McBride wants to take YYoga national. Should the Toronto outlets prove as successful as those in Vancouver, he just might do it out of cash flow, without raising more money.

Which raises several questions: Is Canada ready for a national chain of yoga studios? (It has only recently produced a national fitness chain, Goodlife.) Can you maintain decent margins when you’re competing against starving part-time instructors who offer classes in makeshift spaces? And, in a fad-prone health and fitness universe, does yoga have the staying power to sustain a major corporation? To all these questions, McBride offers a Zen-like yes.

But first, let’s go back six or seven years to how he came upon this venture. Back then, McBride was consumed with Nettwerk, the music label he co-founded in 1984, which went on to find huge success managing artists such as Sarah McLachlan and the Barenaked Ladies. Like most of the business imploding under the onslaught of digital file sharing, Nettwerk had fallen on difficult times. McBride’s personal life was imploding, too. He’d separated from his partner of 25 years and mother of his two children, Cathy. He figured, given the mostly young and female profile of the yoga crowd, visiting a yoga studio might be a good way to meet someone new. It wasn’t. People came to work out, then they left. There was no space for social interaction as part of the experience. (Indeed, most yoga studios didn’t even have a shower or proper change rooms.) Nonetheless, McBride came away with two things: a revelatory relief from chronic muscle pain, and an idea. What if he created a studio that had some of those other elements? What if it had a lounge that served tea and healthy snacks? What if it had a sauna? What if it offered spa treatments, massage and chiropractic services? What if it was designed not for the longtime yogi but for busy people like himself who wanted a better-balanced fitness regime?

Being little more than an enthusiastic amateur, McBride sought out a business partner who knew about hiring instructors. And so, in 2007, he and Lara Kozan, a seasoned teacher and business coach, founded YYoga and began acquiring owner-operated studios. From the start, they had ambitious plans to expand to multiple cities. But yoga is about community, he learned, and the synergies of a chain came from operating several locations in one city. YYoga now has seven studios in Vancouver, each “culture-coded” for its neighbourhood with a different menu of classes and amenities. Membership fees, starting at $96 a month for a full-year commitment, are steeper than most yoga studios, but the range of yoga classes offered, from “power” yoga to kids’ classes, and the atmosphere of a private health club evidently appeal to a significant client base.

This is the model YYoga plans to bring to Toronto. Hogtown, of course, is already served by dozens of yoga studios, some part of chains, not to mention instructors offering classes in community centres, schools and workplaces. New chains coming into the market, which include not just YYoga but the three-year-old upstart Yoga Tree, will have to differentiate themselves, says Svitlana Nalywayko, owner of Breathe Yoga Studio, an independent studio that has been offering classes for a decade in Toronto. “In yoga, you have a very dedicated following. Those competitors are going to have to work harder for a sustained market.”

Others see room for chains to introduce yoga to an untapped market. Kathryn Beet, director of YogaSpace, which operates a downtown Toronto studio, thinks chains like YYoga could act as an entry point for newbies intimidated by more ascetic owner-operated studios. “What they will not be prepared for is that compared with the Vancouver market, the Toronto yoga scene is very sophisticated,” she says. YYoga “would be smart to stay out of the downtown core,” she adds. According to Beet, YYoga approached Toronto studios with buyout and partnership offers two or three years ago, when it was just getting started in Vancouver, but had no success. “None of us felt we needed to be saved.”

Other Toronto area owners sound more fearful of the new competition. There are whispers about studio owners in Vancouver who first partnered with YYoga and were later forced out. (Follow-up questions to McBride on this point, as well as YYoga’s earlier Toronto overtures, weren’t answered at press time.) “I have spoken with several studio owners lately, and this is the general concern—that the innocence and inspiration of what has been created here in Toronto is about to get run over,” says one operator who asked not to be named.

McBride insists YYoga will grow the marketplace in Toronto as it did in Vancouver, introducing yoga to bankers and lawyers put off by more New Agey establishments, and allowing competitors to keep on serving and building their traditional followings. “The yoga scene in [Vancouver] has grown tremendously since we opened,” he says. He plans to roll out YYoga in one city at a time, wherever it can support four or more studios. The next destination after Toronto, McBride says, is Calgary.

One thing is on his side: yoga has been on a steep growth curve for a decade now. According to the Sporting Goods Manufacturers Association, participation in the U.S. grew 23% between 2008 and 2010. But will the interest persist? The same question, of course, was raised repeatedly around Vancouver’s astonishing Lululemon Athletica. While its growth proved sustainable, it would be risky to draw any potential parallels, as the clothing company is not as closely tied to yoga as an activity. Its designs are, by its own description, “yoga-inspired,” but they are just as often worn while running, at the gym or, for that matter, while buying groceries. YYoga, by contrast, can only grow as actual yoga participation grows.

To McBride, that’s a plus, in that yoga has a momentum all its own. Further, he doesn’t expect the wave to crest and move on. “It’s been around a few thousand years. It’s got great staying power,” he says glibly. Then, more seriously, he adds, “Yoga can be very addictive because you actually feel good.”

A still more nuanced assessment comes from Randy Garg, managing partner of Beedie Capital and a member of YYoga’s board. At first glance, yoga wouldn’t appear a natural gold mine, he admits. But, looking at the range of growth sectors, “we certainly think wellness in general is a massive opportunity, and within that, I don’t believe for a second that yoga is a fad.” In cities that already have a range of facilities, the market tends to be fragmented into different styles and standards of quality. According to Garg, the time is ripe for an operator to distinguish itself with a standard quality of product and experience, one that expands notions of what yoga is about.

In so doing, YYoga will inevitably raise fears it is commodifying an ancient practice. Garg, a longtime yoga practitioner who was a member at YYoga before Beedie Capital decided to invest in the company, isn’t bothered. The company was an investor before this latest round of financing, and he has been sufficiently impressed with its cash flow to put in more money.

There’s also no doubting McBride’s passion for yoga or, for that matter, anything he’s done. There may be better margins to be had installing vinyl siding, but he has a history of turning his personal interests into profitable business interests. “I see it as being selfish to be selfless. What I love passionately I can talk to other people authentically about,” he explains.

In the darkest days at Nettwerk, McBride focused on artist management to maintain cash flow. Now he’s easing away from that, which frees up more time to attend to the publishing side, which is finally growing again. The switch also frees up more time for YYoga. Every afternoon, he and his assistant switch modes from music to the yoga business, which is headquartered in the same low-rise building in Vancouver’s False Creek South. The former still dwarfs the latter, though YYoga, McBride says, is on the steeper growth curve. Building a network of studios is just the beginning, he points out, betraying just a hint of his profit-seeking instinct. After that, if you can attract 50 people to a class instead of 25, “that increase goes straight to the bottom line.”

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