A failure business model

One of the largest chain yoga store was closed down on last Friday. Yoga Yoga had over thirteen thousand of members. A lot of member feeling shocked as Yoga Yoga was another giant chain Yoga Store shutdown come after Yoga Planet.

I did not feel shocked after reading whole story of yoga industrial. I think it is a fundamental problem of their business model. Running a business, there will be a variable cost and fixed cost every day and every month. Of course, there will be an income too. Once income cover both variable and fixed cost, you can say you are making profit for the month.

Regarding to Yoga industrial, they prefer their customer to join their premium permanent membership. The premium permanent membership cost around thirty to forty thousand. After joining the permanent membership, customer can enjoy extremely low monthly rate yoga class in on going future. Think it twice, as a giant chain store in Hong Kong, there are expensive rental expense in convenience place in Hong Kong such as Mongkok, Causeway bay, Tsim Sha Tsui etc. and expensive famous yoga master salary expense; how can they cover the cost as low as $100 per month. I think not even talk about fixed cost, only a hundred of dollar is no way to cover the variable cost too. The model is just like what Madoff (馬多夫) did in 2008, and revealed as he cannot honor a redemption of the unit trust. The model is work when there is lot of new join premium members. However, once yoga fashion was gone, the number of new join member will drop quickly. In the same time, cash flow or income will drop in the same quickly rate too. When all pond of blood is dry, the business will be collapse.

In conclusion, I advice when you join a membership scheme, please think about their model. Just for example, Physical fitness and California fitness, will you join their permanent membership now? When they discount a monthly fee as low as $500 for six months, what do think now?