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Xponential Fitness: Bullish on Boutique

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Xponential Fitness

The story of how Xponential Fitness grew from one man’s dream to a boutique fitness powerhouse, its strive for innovation, how it serves franchisees and more.

Anthony Geisler never dreamed he would be the founder of a global fitness company with 10 brands and 2,100-plus locations, much less a publicly traded one.

In 2015, he purchased Club Pilates after selling LA Boxing — the boxing, kickboxing and mixed martial arts franchise he had founded and grew to 200 locations in 35 states — to UFC GYM a few years prior. 

However, the demand for Club Pilates licenses soon outpaced what Geisler and his team had to offer. 

“We had a lot of internal franchisees who wanted to buy more, and then we had a lot of external lead flow coming in of people who had heard of it and wanted to get into it, but we had nothing to sell them,” recalled Geisler. 

So, Geisler began diversifying. He purchased CycleBar in 2017, and with two brands under his belt, he founded a parent company, Xponential Fitness. The goal of this new venture? To serve as a support system for the franchisees of Club Pilates, CycleBar and any other brands the organization acquired. 

Xponential Fitness

Since its foundation, Xponential has become the top curator of boutique fitness brands worldwide, with verticals spanning Pilates, yoga, indoor cycling, barre, stretching, rowing, dancing, boxing, functional training and running. In addition to its 2,100-plus existing locations, 4,400-plus licenses have been sold, and the company’s brands can be found in 48 states and 12 countries. 

According to Ryan Junk, the chief operating officer of Xponential, the company separates its brands into two modality categories — core and emerging. The core modalities include cycling, Pilates, yoga and barre, with each Xponential brand offering fitness classes consumers are familiar with. The emerging group includes stretching, rowing, dance, running, boxing and functional training, encompassing newer brands and modalities with great growth potential. 

Although each brand in Xponential’s portfolio is different, they share one commonality: an engaging and unique workout experience. 

“When we’re looking at brands to acquire, we just need the workout experience to be amazing,” said Junk. “So as long as the product is great, we know we can build it from an operations, sales and marketing perspective.”

This strategy has fueled a growth trajectory for Xponential that ultimately led to the company making its first attempt at going public in 2020. 

“I was in New York City in early March of 2020, a week or two before COVID-19 hit, choosing between the New York Stock Exchange or NASDAQ symbol,” recalled Geisler. 

Boxing

But once the pandemic began, the plans for an initial public offering (IPO) were put on hold as Xponential — like many other gyms across the U.S. — began working around the clock to figure out how to navigate mandated shutdowns, consumer fear and uncertainty. 

“I realized I didn’t have time to even worry about an IPO because COVID-19 happened, and then we were in survival mode,” said Geisler. “And we survived great through COVID-19. We temporarily closed over 1,500 stores but reopened over 2,100. So since March 2020, we opened over 600 new stores — which includes the acquisition of BFT, which added about 130 stores at the time of acquisition. We opened 250 during 2020 alone when we were in the middle of the pandemic.”

One of the saving graces for the brand during this time was virtual fitness. A year prior to the pandemic, Xponential had fortuitously begun working on a digital platform that would allow members to access fitness content on-demand. It had invested in its own production studio and equipment, and had thousands of hours of content already filmed, with plans to launch the platform on April 1, 2020. 

“So when COVID-19 hit, all we had to do was shift that digital plan up by about two weeks and then start distributing the content we’d already spent almost a year developing,” said Geisler. “Thank God we were in a good position to do that. Between the digital, indoor and outdoor workouts, we still processed almost half a billion dollars in systemwide sales while we were closed.” 

As a result of Xponential’s success navigating the pandemic, Geisler began exploring the idea of taking the company public once again. With investors lined up and the offering prospectus filed, Xponential was on target to go public in July 2021. 

Geisler headed back to New York City for a second time to drum up additional support for the pending IPO. 

But circumstances had changed from the first go-around. The week they were scheduled to go public, 19 other companies were also pending. The delta variant was beginning to fuel another surge of the COVID-19 pandemic. And labor shortages were being reported nationwide. 

“We had a lot of trouble just getting eyeballs on us, even though the company was great and continued to perform,” said Geisler. 

However, Xponential’s public offering was still successful, and was made official for the July 2021 target.  

Stock Exchange

“Despite the challenges we faced as a result of the pandemic, we firmly believe in our strategies and business model that will enable us to meet these challenges, and the success of our IPO demonstrates our investors also had confidence in our business strategies,” said Geisler. “There were a lot of companies that just couldn’t go public, including six the next week that couldn’t even raise enough interest. We had interest. We just put our heads down and said, ‘We are public, that’s done. That’s kind of like an administrative thing. Now let’s go to work creating value for shareholders.’” 

As of Q4 of 2021, Xponential had fulfilled its promise, increasing the stock price 100% in three and a half months. 

And according to a company press release issued on January 11, 2022, Xponential is expected to meet or exceed the high-end of its 2021 outlook, including an additional 230 to 250 new studio openings and projected revenue in the range of $147 million to $148.5 million. 

This forecast comes as more and more consumers return to in-person fitness. According to club management software company ABC Fitness Solutions, new joins across the clubs in its platform are up 14% compared to 2021 and up 6% compared to 2019. Similar data is being reported across the industry.

Also bolstering Xponential’s outlook are two specific initiatives. 

The first is a partnership with Fitness International, which will bring the brand’s boutique studios to 500-plus LA Fitness locations and City Sport Clubs nationwide.

According to Sarah Luna, the president of Xponential, the deal is a great opportunity for the company to expand its footprint and market reach, increase brand awareness and fuel franchisee growth. 

Pilates

“We can get more of our studios into great retail centers now that we can go into LA Fitness and City Sport Clubs,” explained Luna. “We’ll be reaching a different type of customer that has access to LA Fitness, but also wants to be able to take a Club Pilates class, for example. We love the business play this presents for franchise partners because their build out will be less expensive. We think this is an awesome way for our franchise partners to continue to grow and develop their own businesses, as well as tap into a different customer base they haven’t been able to tap into before.”

The second initiative is XPASS, a cross-brand subscription that allows subscribers to book classes across Xponential’s portfolio of studios. The offering is similar to ClassPass, but proprietary to Xponential. 

A key differentiator of XPASS is that the offering is dynamically priced, meaning if a subscriber wants to take a class at a popular time with a popular instructor, the class would be more expensive than a class booked during an off-time with a less popular instructor. This is similar to Uber, with users paying more for requesting rides at peak-times. 

XPASS’s benefits are two-fold, Luna explained. For one, the consumer gets to sample brands and experiences dependent upon their needs and interests, ultimately exposing them to more of Xponential’s offerings. 

“What we’re seeing so far is about 15% of new account holders for XPASS are brand-new to the Xponential ecosystem,” said Luna. “So they’ve never worked out in one of our studios before. This is a great way for them to dive into our studios, and many of them end up buying a membership directly with the franchise partner, and then ‘sample’ a couple times across some of our other brands.”

The second benefit is the franchisee is able to more easily fill classes — the main driver of revenue for boutique studios

“Most boutique fitness customers already go to several places, and they like to ‘snack,’” continued Luna. “That is something we continually discuss with our franchise partners — people are doing this anyways. We’re not going to be stopping them from doing it by not offering it. So we might as well offer it and actually control more of their wallet share and more market share by offering this pass. We want to keep people within our ecosystem of 10 brands and not have them leave or go to a different brand outside of the ecosystem.”

In fact, helping franchisees reach more people and get “more butts in seats,” said Junk, is where Xponential excels as a franchisor — whether it’s through XPASS or the marketing and sales support the company provides. 

Propping up franchisees to excel comes through particularly during the early stages of the relationship — essentially, as soon as a franchisee has signed on to open a location. Once this happens, Xponential’s marketing and sales support kicks into high gear. 

Yoga Six

“Over 90% of our letters of intent go through in real estate, so we made the decision to actually start marketing new clubs before the lease is even signed,” explained Junk. “That way the day the lease is signed, we’ve already got people lined up to buy a membership.” 

The more successful a franchisee, the more successful Xponential is as a franchisor. 

Although Xponential’s current trajectory may not have been something Geisler could have dreamed of, its current standing as a publicly traded, global company is a win for the entrepreneur. All in all, trusting his gut and purchasing Club Pilates back in 2015 kicked off the journey of a lifetime.

“The plan was to enjoy a hobby, which turned into a so-far six year journey that continues to grow,” said Geisler. “We’ve built something great that we’re really proud of.”

 

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Rachel Zabonick-Chonko

Rachel Zabonick-Chonko is the editor-in-chief of Club Solutions Magazine. She can be reached at rachel@peakemedia.com.

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