In a smart Edwardian-era London hotel, Alberto “Beto” Perez is explaining why he is wearing a tracksuit top under his pale leather jacket. Immediately after meeting up with his two fellow co-founders of Zumba Fitness, the dance exercise brand, he is heading off to teach a class.
The three men – all called Alberto and all raised in Colombia – are in London because they are about to open their only office outside the US, where they first set up Zumba in Miami a decade ago.
Mr Perez, a former aerobics teacher, created what became Zumba in a gym in his home city of Cali, in southwest Colombia, almost by accident when he forgot to bring his usual aerobics music tape. He promptly improvised an exercise class based on some dance tapes of his own he had with him. It proved so popular that he carried on with the new class. He eventually moved to Miami, but along the way his class in Colombia included the mother of Alberto Perlman. She was such a fan that she urged her son to look up Mr Perez when he was next in Miami. Alberto Aghion, who looks after the operational side, got involved because he and Mr Perlman had known each other since school and he too was living in Miami.
Over the past decade the three have taken the dance workout programme that Mr Perez was teaching in a Miami gym and turned it into a global fitness brand. The founders decline to reveal financial details, but say about 14m people attend Zumba classes each week, in 140,000 locations worldwide. Inc magazine has estimated the value of the business at $500m.
Zumba began in gyms, but the format has spread to classes run by instructors in hired school rooms or church halls; in nightclubs during the day; and even in some big companies’ offices during lunch breaks.
The company is no longer just about the classes, although they remain a core part of business. About half the revenue comes from the extension of the name to music collections, clothing and footwear. In addition to an estimated 12m Zumba DVD box sets, fans have bought 8m video games in which they undertake a mixture of dance and exercise to score points. Mr Perez says: “About 40 per cent of the music [used by Zumba instructors] is created by us and 60 per cent is licensed.”
The co-founders are clearly pleased to have achieved so much on their own. Recently, however, they accepted a small investment from a group of angel investors, including a former gym entrepreneur, who have joined the board. Mr Perlman says the move is as much about tapping their expertise as needing new funds.
“We had to learn about fitness licensing and the fitness instructor model,” Mr Perlman says. “We had to learn how to relate to the gyms, we had to learn how to produce DVDs and we had to learn how to produce events … We have events that we call ‘fitness concerts’ – 7,000 people exercise while there’s an artist singing and instructors teaching.”
The force behind the Zumba Fitness business model is Mr Perlman, a graduate of Babson College, the Massachusetts business school famous for its entrepreneurship MBA. He cut his teeth in the 1990s creating Spanish-language clones of US dotcom businesses, which he sold to the companies he was copying. After the dotcom bubble burst in 2001, he returned to Colombia, where he heard about Mr Perez.
The founders poured their savings into making the fitness class into a brand that could be distributed through health clubs. By 2005, they were down to their last $14,000 and had failed to interest a single health club chain – they all had their own dance classes already.
“We said, OK, we’re going to spend all this money, everything we have, every single penny, and we’re going to create this training programme [for instructors],” says Mr Perlman. They thought: “If 200 people join, we will continue.”
In fact, 450 aspiring instructors signed up, each paying $30 a month to be part of the Zumba Instructor Network in return for training, marketing materials and the support of a central administrative function. A franchise model was born.
“That was a turning point, because it immediately gave us recurring revenue,” says Mr Perlman. Fitness instructors were crucial because they had access to the gyms, and the incentive to make Zumba a success.
Would-be instructors typically pay more than $300 to undertake the official training, but the monthly payment to Zumba is still $30. “We said, ‘the ones that want to be entrepreneurs we will turn into entrepreneurs, and the ones that want to teach in gyms we will make the star of the gym’.” It was still not easy, Mr Perlman says. They relied on money from Mr Perez’s classes, second jobs and Mr Aghion’s wife’s salary. “I had a job in the morning selling food to the supermarkets in Colombia … and in the afternoons I would show up at Zumba,” Mr Perlman adds.
As he explains the model, it is clear the three share a strong personal bond. Often travelling to visit new locations or catch up with the instructors who are the face of the organisation, they talk every day on the phone. There is also a degree of mutual teasing. Mr Perlman recalls the prank played when Mr Aghion’s colleagues faked a strongly worded letter of complaint related to the zumba.com domain name, which Mr Aghion had persuaded the then owner, a boy in Alabama, to relinquish. The letter was delivered in the middle of a meeting, during which they all observed Mr Aghion’s discomfort. Recalling this, Mr Perlman is heartily amused. Mr Aghion just smiles, faintly.
The plan now is to extend the Zumba brand into yet more markets, in particular Russia, India and Brazil. By 2014, the owners hope to operate Zumba classes in China.
While they constantly look for new revenue streams, Mr Perlman says they never forget what is at the heart of the business: “Everything is about driving people to classes.” The DVDs and the video games always encourage viewers to go to a class.
Do they ever worry Zumba Fitness will grow so big they will lose sight of what made it a success – a danger for some fast-growth start-ups? No, they say, so long as they stay in touch with what happens in the classes. “The one thing we are about is the class,” says Mr Perlman. “It’s that instructor teaching that class … and those people smiling and being happy.
“As long as we keep our mission, which is to empower instructors, we give those instructors a business model.”