How Xponential Fitness Created National Brands Across Eight Different Verticals

Offering a diversified portfolio of specialized fitness concepts in eight unique verticals, Xponential Fitness is the largest curator of boutique fitness brands in the world. As an industry disruptor, the company was ranked in Fast Company’s annual list of the World’s Most Innovative Companies. I sat down with Anthony Geisler, CEO and founder of Xponential Fitness, to learn more about their unique approach to the fitness world.

Dave Knox: What was the catalyst for you to start building the Xponential Fitness portfolio?

Anthony Geisler: We had Club Pilates as our first brand, and we had sold about 900 of those, which was tapping out all of which we could sell in the U.S. Franchisees were getting those open and were making good returns and enjoying the business and were coming back to us for additional franchises, and we didn’t have anything to sell them. It was frustrating for them because they could not expand their portfolio with us. Since we can’t have two Pilates concepts competing with each other, we started to look for complimentary boutique franchise concepts, with a focus on different modalities like yoga, cycling, running, dance, barre, and things of that nature. Then, under those modalities, we looked for brands that were available, and then just went on a buying spree. We bought seven brands over an 18 month period of time, which is a lot of transactions to actually close and complete. We then were able to open that up to our current list of franchisees that were looking to expand, as well as out to the public.

Knox: What advantages have you gained by diversifying across those eight brands and different modalities of fitness versus focusing on a single one?

Geisler:  First, it has allowed our franchisees to be able to expand. If we had stayed in just Pilates and we had not sold 900 so quickly, we may have done what our peers have done and just stayed in one brand. If we were selling 50 franchises a year, we probably could have done that for 20 years, but since we were selling 300 to 400 a year, we sold out very quickly and that pushed us into multiple modalities. It was not like we started out by saying,” Hey, let’s just start out with these eight modalities and eight brands in our portfolio.” Second, along the way, we had figured out that Xponential was really nothing more than a sales, marketing, and operations company disguised as Pilates or yoga, or whatever it might be. We knew that we could use that, what we call today that X factor, and lay that over other brands and other modalities and really give our franchisees the ability to operate multiple units under the same flag and using the same point of sale systems and operating systems so that they could have shared services even across modalities.

Knox: With new fitness trends emerging all the time, how does Xponential support your franchisees as they look to differentiate within the everchanging landscape of fitness?

Geisler:  We really stay in modalities that are pretty tried and true. We do not have anything that I would say is new as a modality. If you look at Pilates and yoga and barre, they have all been around for a long time. People give me a lot of credit as a visionary and ask me all the time what I think the next fitness craze is going to be, but I am not that guy. I did not predict Pilates was going to be big. When I did Pilates, everyone was already doing Pilates. They just were not doing it under one brand. There was no Coca- Cola in the industry. I did not have to wonder if people wanted to try Pilates, so there was not a risk there. It was just creating a brand that could be a national brand.

Now at the running studio brand that we have, I do not have to wonder if people run. I see it every day on the streets. We see massive marathons. We know people are running. We know people are running indoors on treadmills because you see it in gyms across the country. You know people are running and rowing and all these different concepts that are out there. You are not really taking a gamble on the modality itself. You are taking a gamble on if this will work as a standalone and can it work as a national brand?

Knox: In the world of COVID, the fitness world has been forced to move digital. This was something Xponential had started in advance of the current crisis. How do you think about the balance of physical versus digital going forward?

Geisler:  We were in the right place at the right time last year. We started looking for a production studio and built it out.  We now have our own sound stages, full production crews and live editing in a real state-of-the-art Hollywood building just around the corner from our corporate office. At our National Convention at the end of last year, we announced to our franchisees that we were going to be launching this video on demand and live product in April 2020. When COVID hit, the biggest challenge for us was just launching it a few weeks earlier since at that point, we already had thousands of hours of content in the can across all eight modalities.

It is important to realize that we were not trying to be Peloton, Mirror, or any of these other brands that are out there on the at-home equipment side. What we were really looking to do is not have a missing hole in our business plan. When we bought AKT and we bought Pure Barre, those brands already had this version of digital.  AKT’s was more of a handy cam recording. Pure Barre was a DVD, an old DVD business, where they uploaded the DVDs online. Then in our other modalities, Club Pilates had a video on demand business we had tried to launch, but the content was not that great. You really had three of our eight brands that had a quasi on-demand product and five that had nothing. I felt like we needed to be in the digital space. We did not need to be a Peloton or anything like that, but it was a hole. If you look at it and say, “Well, you’ve got five that are missing and three that are halfway done,” I wanted to have eight that were done well, so that we had that continuity between the brands, the look and feel, and really taking all these brands we’d put together in the physical world under the Xponential umbrella and make those the same in the digital world.

Knox: A large part of the growth of Xponential has been through acquisition. What have you learned about bringing a new business into the fold?

Geisler:  I make an analogy to raising someone’s children. In the brands that we bought that had just a few locations, it is a lot easier to go out and find your franchisee and lay the land of how you view what the partnership is going to be. It does not make it easy, it just makes it a little bit easier. When you are acquiring a brand like a Pure Barre where you have 500 plus locations, it is more difficult. That brand, prior to us buying it, had five CEOs in five years. By the time the new CEO got in, figured out what the old person did, figured out what they wanted to do, and tried to execute it, they were gone and somebody else was on. No franchisee really operated the same in that brand and none of the studios looked the same. We came in with an approach to say,” we are level setting where this is. This is what you can expect from us. This is what we expect from you.” We spent almost $20 million of our own money rebranding and remodeling all the studios across the country. To give you a scale, that’s a couple of times more than the company even makes, and a heck of a lot more than what we collect in royalty in a year. So, that was a massive giveback to the franchisees. Their franchise agreement actually states that they are in charge of that expense, but for us, we wanted to be a good partner. We wanted to show from the get-go that we are a great partner. We want these studios to look and operate the same and we were willing to invest that money into everyone’s businesses so that we can be 500 moving as one and not 500 individuals. And then we brought the best person we had over at Club Pilates, Sarah Luna, in as President. She was the number two in command and worked with me for several years. We knew she was going to be an amazing leader at Pure Barre. She has been at Pure Barre coming up on two years and she is the longest reigning CEO of Pure Barre in the last decade.

Like in any business, partnership, or franchise network, 100% of the franchisees at Pure Barre do not love what we have to say. We do not love 100% of what they have to say, but in the spirit of partnership, we are always available to try and figure out what is that common ground that works both for us and achieves the goals of the brand. It is different to come in to assist them after people have been operating a business for 10 years a certain way. Particularly when we had to convince that we were here to stay and we were not going to leave them like the last five CEOs did. The first step was showing them that we were willing to invest in them and truly partner with them.

Knox: What do you think really separates boutique fitness in the industry?

Geisler:  As a concept of boutique fitness versus large gyms, we are competing on being the best at what we do in instruction, community and environment. We are much smaller, thus the name boutique. When you are a franchised boutique, as well, people know who the owner is of that location. Those people are typically embedded in the community. You also know the instructors, have an affinity for the location, and an affinity for the the instructors themselves. We saw that a lot when COVID happened and our instructors started doing live workouts from their kitchens and things of that nature. We saw a lot of support videos that members made to give to instructors. We just saw a lot of love and support from our community. I’m sure big box large gyms saw that as well, but a big box is trying to be a little bit of something to a lot of people, and we’re just trying to be something amazing to one group of people in one modality, in one niche. So, by size, we are smaller. By membership count, we are smaller. It is more of a community and more homegrown, and more intimate than you find in a larger facility.

Knox: Your franchisees have benefited from your eight different brands but what do you see as the interaction of your members between the brands especially during COVID?

Geisler:  There is always a silver lining in any situation. Launching Xponential Fitness GO, our on-demand product across our 8 brands, to all members has been that. If you were a Pure Barre member and we switched you from the physical to the digital world, when we started providing you Pure Barre digital content, we also started providing you seven other brands of content that you got for free. It really was a coming out party for Xponential, as well, because people know our brands, but they do not know the parent. We have not taken a big stance in trying to promote the parent itself, but given COVID and the situation that happened, it opened that door. Our membership base has learned a lot about Xponential as a parent over the brands as they go access to all 8 modalities of content. The silver lining here was that people are interacting digitally in between brands. They have learned about the parent company and the sister brands and the suite of brands and modalities that we have, and just makes it that much easier for us when we go to launch a physical pass in the future.