The Business of Sleep-Yelo of New York City

22Jan2010 Filed under: Entrepreneure Stories, Franchisee, Startup Author: Bikash

You snooze, they win. Offers harried urbanites 20- to 40-minute naps in sleep pods.

Will you pay to get a nap? Well, your answer can make or break entrepreneur Nicholas Ronco, because on your answer depends the fate of his business of sleep.

Chairs to take a nap

You will find Yelo in an ordinary storefront on West 57th Street, which is a busy industrial stretch of Manhattan’s midtown. Once you enter Yelo, you’ll be able to leave urban noise and pressures behind. You will find a soundproof YeloCab, a cozy cabin designed for tranquility. Yelo sells Naps.

The business is booming.

“The old ’80s or ’90s attitude of ‘I’m a type A personality; I can get by on four to five hours of sleep’ is going out the window,” Ronco says. “A lot of these people actually die of a heart attack at 45 and 50. They’re no hero anymore.”

Ronco developed Yelo to offer some rest to the BlackBerry-addicted corporate workers. His customers can fall asleep smelling the aromatherapy.

What inspired him

Ronco saw city dwellers napping in bathroom stalls and parking lots. Then the idea of offering a tranquil place to take a nap occurred to him. Ronco could see an unfilled need and demand of providing a place to take a nap. His target customers are the New York’s 9-to-5 employees who would like to curl up for a few minutes on a lunch hour or break.

How he started it

Ronco needed to sell his idea to investors and potential clients. First he set out to find his clients. He pitched the idea to HR departments around the city. The response he got was-

“What they told me was not, ‘Ok, great, we’ll give you money’ or ‘We’ll send our employees,’” Ronco says. “They said, ‘If you build it, we’ll try it.’”

Finance

then he needed finance. Ronco approached family and ex-colleagues for investments.

“A lot of people and potential investors were extremely sensitive, because they could all relate.” He got money from an investment banker and the chairman of a cosmetic company.

Start

Yelo started its operation in February 2007. Till now, more than 4,000 nappers have visited Yelo. Its clients range from corporate executives to twenty something “disco nappers.” It also has corporate clients such as Alvin Ailey Dance Theater, Hearst Corporation and BMI.

Pricing

for pricing his naps, Ronco checked the prices of everyday commodities (a cab ride or lunch etc.). If you take a snooze at Yelo, it will cost you $15 (20 minutes) to $28 (40 minutes).

During its first year, Yelo booked revenue of $400,000. In the next year, Ronco’s projection shows sales of $1.3 million. The revenue is growing by an average of 23% each month.

Future

Ronco expects to have 25 Yelo outlets in New York City in the next few years.

“We proved the concept,” Ronco said. “It’s the price of something people consider to be absolutely useful and don’t really think twice about. We had no price resistance whatsoever.”

The YeloNap is designed using the idea of the Power Nap and lasts from 20 to 40 minutes. Such naps are medically proven to increase alertness and productivity. Power naps has become the “new coffee break” for many of the business people.