Anthony Geisler says Xponential has been clamoring to expand for some time now, and is ready to do so with Wall Street on board
This article is part of ATN’s DISRUPT 2023 video series, which features key conversations with executives from the most successful brands in fitness and wellness. To watch more videos, click here
Xponential Fitness is the world’s largest franchisor of boutique fitness brands, but it’s been a while since the company has made acquisition headlines.
That could soon be changing, according to Anthony Geisler, Xponential’s founder and CEO.
Speaking with Athletech News as part of DISRUPT 2023, Geisler confirmed that Xponential is in talks with several potential acquisition targets about becoming the 11th brand under the boutique fitness franchisor’s umbrella.
“Today I’m talking to about half a dozen different companies and probably three or four different (fitness and wellness) modalities, really trying to figure out who is the best fit for us,” Geisler told ATN founder and CEO Edward Hertzman during a one-on-one conversation.
Nothing is imminent, Geisler stressed, but he said Xponential’s interest in buying an 11th brand comes as there’s a renewed appetite for deal-making on Wall Street.
“If we were a private company, we’d probably have 12 or 13 brands today, because I’d own 100% of it and I’d just be (acting) as a steward of my own capital,” Geisler said. “But being public and having to be a steward of tens of thousands of people’s hard-earned dollars in the public market, it means we need to listen to those investors.”
For a while, those investors were urging caution amid broader macroeconomic concerns, Geisler shared, which forced Xponential to pull back on any expansion talks – the company hasn’t acquired a brand since it bought BFT in October 2021 for $44 million.
“Over the last four to six weeks, investors have been changing their tune,” Geisler said. “Now the first question and about 80% of the volume of questions I get are around, ‘Where is the 11th brand?’”
Xponential’s Supply Crunch
The timing is right for Xponential to expand its portfolio of boutique fitness businesses, Geisler said, noting that as successful as the company’s 10 current brands are, there’s a cap on how many Club Pilates or StretchLab locations the world can fit without driving profits down for other franchise owners.
That’s not to say Xponential’s current brands will stop opening new locations, they just won’t be able to do so at the same incredible rate they have in years past.
Geisler noted that Xponential sold 1,000 franchise units in 2022, but is on pace to sell only between 600 to 800 in 2023. That’s not because consumer demand for boutique fitness is falling, it’s because there’s not enough quality land for Xponential to keep opening studio locations among its current brands.
“We’re running out of supply,” Geisler said. “So we will need to acquire an 11 brand to get supply back and be able to fill the demand that we have.”
Wellness & Recovery Are Top of Mind
As for what kind of brand Xponential might buy, Geisler believes there are many potential options, but he singled out wellness and recovery as an increasingly popular sector the company might look to tap into.
“I continue to get more and more sold on wellness and recovery,” Geisler said.
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In terms of specific recovery modalities, the Xponential founder said he’s not sold yet on the long-term business viability of infrared sauna and cryotherapy, but he’s open to changing his mind.
“Hydration, for instance, I wasn’t sold on that a few years ago and I’m sold on it now,” he said.
If Xponential does acquire a recovery-focused brand, it will likely be one that focuses on a single core service rather than a suite of different wellness offerings. Buying someone like Restore Hyper Wellness, a quickly growing wellness brand that provides everything from red light therapy to hyperbaric chambers to IV drips, is likely off the table for Xponential.
“We probably wouldn’t do anything expensive and complex like a Restore,” Geisler said of a potential acquisition.
However, he did give a preview of what Xponential’s 11th brand could look like in terms of franchise investment and the square footage of a typical location.
“In the $350,000 to $400,000 (required franchise investment) and 1,500 to 2,000 square foot box area is where we’ve done best, and that’s probably where we’ll stay,” he said.
Xponential’s 11th brand won’t necessarily be in wellness, though. There are plenty of fitness concepts the franchisor has yet to get its hands on.
“There’s the ability in fitness to do things like bootcamps or high-intensity interval training,” Geisler said. “There’s other things we don’t have on the fitness side.”
