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Franchise watch: Xponential Fitness is at the forefront of multi-brand fitness franchisors

Franchise watch: Xponential Fitness is at the forefront of multi-brand fitness franchisors

The evolution of fitness franchising.

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With eight prominent boutique fitness brands in its franchise portfolio and close to 1,600 studios open in five countries, Xponential Fitness is one of the world’s largest and fastest-growing franchise brands. With household names like Pure Barre and Club Pilates, its brands are category-leading franchisors, but with all brands combined under the banner of parent company Xponential Fitness, the company is at the forefront of multi-brand franchisors.

But how did a single company become such a franchising powerhouse in less than three years, with pioneering boutique fitness brands including Pure Barre, Club Pilates, CycleBar, YogaSix, AKT, StretchLab, Row House, and STRIDE?

THE ORIGINS OF XPONENTIAL FITNESS

According to John Kersh, chief international development officer for Xponential Fitness and a 25-plus year veteran of the fitness industry, the company has the good fortune of strong strategic vision and great timing. “The founder of Xponential Fitness, Anthony Geisler, was one of the pioneers in boutique fitness with the brand LA Boxing, which he grew from a single studio in Costa Mesa, California in 2002, to a national U.S. brand that he eventually sold to UFC Gym in 2012,” says Kersh. “Today, Anthony is fully-focused on being the world’s largest and most influential boutique fitness franchise company.”

After a brief post-exit break, Geisler acquired his next boutique fitness venture, Club Pilates, in March 2015. Once again, he set his sights on fast growth through franchising a concept with a strong product. In the five years since acquiring the brand, Club Pilates has grown from a handful of locations primarily around Southern California to a global player with over 600 locations open in the United States, Canada, Japan, South Korea, Saudi Arabia and soon to be in Europe and Latin America.

But Geisler saw an even bigger opportunity as he began to grow the Club Pilates brand. What happens, he wondered, after all of the available franchise territories for Club Pilates are sold out in the United States? How could he continue to grow and create new opportunities for his company and his franchise owners? From this question, Xponential Fitness was born as a platform that enabled Geisler to launch a collection of complementary boutique fitness concepts in underdeveloped modalities through a proven franchising strategy.

Xponential Fitness LLC was formed in September 2017 and quickly announced the acquisition of its second brand, the group indoor-cycling leader CycleBar. Over the course of the next 18 months, Xponential Fitness went on an acquisition spree, adding up-and-coming fitness concepts in modalities that did not yet have a market leader, including stretching (StretchLab), rowing (Row House), dance (AKT), yoga (YogaSix), and running (STRIDE).

PURE BARRE ACQUISITION PUSHES STUDIO TOTAL OVER 1,000

In late 2018, Xponential Fitness announced its purchase of Pure Barre, one of the early innovators in boutique fitness, founded in 2001. This acquisition dramatically increased the Xponential Fitness footprint, adding more than 500 Pure Barre studios into its family of brands, and bringing its total number of studios to more than 1,000.

With every acquisition, Geisler and Xponential Fitness made sure each brand had the resources and teams to successfully support their own franchise owners. As opposed to a centralized approach, every Xponential Fitness brand has a president, a chief marketing officer, a director of education, a national sales director, and other key roles focused entirely on the franchise owners of their own brand. With all of the brands being located under the one roof at the Xponential Fitness headquarters office in Irvine, California, there is a great sense of collaboration and camaraderie between teams, along with some friendly competition.

EXPANSION TO EUROPE, ASIA, AND THE MIDDLE EAST

Having made inroads into neighboring Canada with Club Pilates and Pure Barre, Xponential Fitness began its overseas expansion in a big way in 2019, signing master franchise deals for Japan, South Korea, Singapore, and Saudi Arabia. The company also signed a milestone agreement to develop the German and Austrian markets in collaboration with the LifeFit Group, operators of more than 75 Fitness First studios in the market, as well as license holders for Barry’s Bootcamp and several other fitness concepts.

The agreement with the LifeFit Group includes the rights to develop the Club Pilates and Pure Barre brands in Germany and Austria, as well as other Xponential Fitness brands in the future. The German market is the second-largest fitness market in the world behind the United States, and German consumers value quality and consistency; something the collaboration between the two experienced players is sure to deliver on.

“Boutique fitness is still in its infancy, which offers a sizable, long term opportunity for the Xponential Fitness brands”

Xponential Fitness views Europe as its highest priority expansion market. According to Kersh: “The European fitness market continues to grow and diversify, with everything from low-cost options to traditional big-box gyms. Boutique fitness is still in its infancy, which offers a sizable, long term opportunity for the Xponential Fitness brands.”

STRENGTHENED BY THE GLOBAL PANDEMIC

Xponential Fitness opened its 1,500th studio in early 2020, just as the COVID-19 pandemic hit the United States. Facing the imminent shutdown of most of Xponential Fitness’ studios across the country, Geisler was not intimidated by the challenge: “We looked at it and we said, do we want to close the stores, stop billing everybody and sit idle, or do we want to fight our way through the storm? The quick answer was: let’s go fight the fight. Let’s get back to the market first. Let’s switch people to virtual so we can keep them engaged. We believe it will allow us to sustain the business during this time, but also get back into the market quickly.”

As a result of Geisler’s decisive position, Xponential Fitness made a fast pivot and launched its online ‘GO’ platform, offering live and recorded classes for the members of every brand, as well as local franchises teaching virtual classes across the country. Months earlier, the company had purchased a production studio for just this purpose. It was able to accelerate the project and quickly launch to support franchise owners and consumers who suddenly lost access to their nearby studios.

For its franchise owners, the move to digital enabled Xponential Fitness to continue offering value to existing members while also generating membership revenue, albeit at a reduced level. Recognizing the need to quickly find ways to provide additional financial relief for franchise owners, Xponential introduced a 50 per cent reduction in its marketing fund fee; free shipping on retail; 20 per cent off retail, and absorbing all transaction costs and fees associated with gift card purchases. Vendor concessions across marketing, sales, equipment, and lending partners were also negotiated for owners using the weight of Xponential’s network of 1,500-plus studios.

The pandemic pivot has highlighted just how creative and nimble the Xponential brands need to be, finding ways to generate alternative revenue streams for their franchise owners, and maintaining brand awareness and loyalty during a digitally competitive time for the fitness industry.

Now, the focus is on successfully reopening studios with what has recently been referred to as “The X Factor” – sales, marketing, operations, and scale. Many members have expressed their eagerness to get back to their workouts as soon as studios start to open back up, perhaps the best sign of Xponential choosing to fight the fight and weather the storm.

THE FUTURE OF FITNESS

Over the past decade, as fitness participation in Europe, Asia and the United States has continued to climb, members have become more fitness-savvy and are increasingly looking for options beyond traditional gyms and leisure centers. Boutique fitness studios, with their small, instructor-led classes, comfortable facility size, and strong sense of community, are a perfect option for consumers.

In many ways, the move toward boutique studios is a natural evolution of the fitness industry, much like the movement of the restaurant business toward the fast-casual segment. Smaller, more efficient fitness centers offer a value proposition not only for consumers but also for franchise owners. Boutique fitness studios offer a relatively low initial investment, no inventory, and no food spoilage or health inspections. Most importantly, the Xponential Fitness studios feature a recurring revenue business model which provides consistent and predictable cash flow for franchise owners; something Geisler implemented many years ago to differentiate his franchise opportunity within the industry

Looking ahead to 2021 and beyond, Xponential Fitness plans to continue its expansion into Europe and is actively searching for qualified partners to develop its brands in the U.K., France, Spain, and Italy, in addition to the German market where the brand already has a well- established partner.

“Further European and global expansion is a major focus for Xponential Fitness in the years ahead,” says Kersh. “We’re excited to be well-positioned to satisfy the changing interests of fitness consumers worldwide, and to have an amazing lineup of brands for franchise owners to choose from across key fitness categories.”

AT A GLANCE

Established: 2017

Number of franchised outlets: 1500+

Brands: Club Pilates, CycleBar, StretchLab, Row House, Pure Barre, YogaSix, AKT, STRIDE

Location of units: U.S., Canada, Japan, South Korea, Australia, Saudi Arabia

Contact: John Kersh, john@xponential.com

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