The Xponential Fitness Scandal Uncovered: Allegations, Closures, and Controversy
In a shocking turn of events, the fitness franchising industry has been rocked by a scandal that has unveiled an alleged web of deception and financial turmoil at a major fitness franchise brand. At the center of this controversy lies Xponential Fitness, a company well-known for its diverse portfolio of Boutique Fitness Brands, including Stretch Lab, Club Pilates, CycleBar, Pure Barre, Row House, Yoga Six, and Stride Fitness.
The Allegations Against Xponential Fitness Founder, Anthony Geisler
Investigative work by Fuzzy Panda Research has revealed a potentially troubling history surrounding Xponential Fitness's CEO and founder, Anthony Geisler. These revelations include his alleged involvement in a boiler room operation and questionable business practices earlier in his career. Geisler's credibility has come under scrutiny due to accusations of dishonesty and misleading behavior towards franchisees and investors. Notably, these allegations extend beyond Xponential Fitness, encompassing Geisler's time in other fitness companies and the online gaming software sector.
Over 30 Stores Permanently Closed Contrary to Claims
Contrary to Xponential Fitness's assertion of never having closed a store under its management, investigations by Fuzzy Panda Research have unveiled a startling reality. Records indicate that over 30 stores have permanently shuttered, casting doubt on the company's transparency. The study meticulously examines Google reviews, shedding light on the circumstances of these closures.
Troubled Past: Alleged Schemes and Scandals
Geisler's past ventures, including Interactive Solutions and LA Boxing, have been marred by allegations of scams and illegal practices. These incidents have earned him a reputation in some circles as unscrupulous. Notably, a lawsuit related to LA Boxing can be found online. Moreover, the report highlights that more than half of Xponential studios fail to generate positive financial returns, resulting in significant losses for franchisees.
Disparities Among Fitness Franchisees
Not all franchisees under the Xponential Fitness umbrella are experiencing the same level of success. While Club Pilates and Yoga Six franchisees seem to be thriving, others, such as CycleBar, are reportedly struggling to turn a profit. The report raises concerns about Xponential Fitness potentially fabricating financial metrics, selectively excluding underperforming stores from their calculations in their Franchise Disclosure Documents (FDDs). You can check those on our FDD marketplace!
Financial Struggles and Overcharging Complaints
Franchisees have reported being overcharged for various expenses, including exercise equipment. This information, shared in the company's quarterly reports, reveals significant revenue generated from equipment sales annually. The report suggests that over 90 percent of franchisees resort to SBA Loans, jeopardizing their savings and retirements. This figure, based on the research, is considered quite high.
Evolving Definitions: Closures and Terminations
Xponential Fitness's claim, as of October 2022, of never having closed a studio is disputed. At Vetted Biz, we define a closure as a unit ceasing operation and not immediately transferring to another location. Terminations of license agreements are also considered closures. The discrepancy lies in Xponential Fitness's definition, which excludes some instances from their closure count.
High Commissions and Insider Activities
Xponential Fitness offers substantial referral fees for new franchisees and for finding buyers for their corporate-owned and managed locations. Commissions for brokers can range from $30,000 to over $100,000, depending on the size of the territory. Insiders, including Anthony Geisler, have engaged in significant share transactions in 2023, with millions of dollars' worth of shares being sold.
Xponential Fitness Responds
Despite the scandal, Xponential Fitness has reported remarkable revenue growth and expansion in 2022. Looking ahead, the company projects a twofold increase in profits by 2024, painting a hopeful outlook for its future. However, the ultimate trajectory of this brand remains uncertain, and time will reveal its fate. It is worth noting that insiders within the firm have made substantial sell-offs of shares over the past year, which may indicate underlying concerns. While there were some buy actions in August, they pale in comparison to the significant sell orders executed earlier in the year, adding a layer of complexity to the brand's ongoing narrative.
About the fitness industry
The fitness industry has undergone a remarkable transformation over the past few decades, evolving from a niche pursuit to a global phenomenon that touches the lives of millions. It encompasses a diverse array of offerings, catering to individuals seeking everything from cardiovascular health to strength training, flexibility, and mindfulness.
Notably, several franchise brands have emerged as front-runners in this ever-expanding market, democratizing access to quality fitness experiences. Names like Anytime Fitness, with its 24/7 accessibility and community-driven approach, and OrangeTheory Fitness, known for its science-backed interval training, have become household names.
In conclusion, the fitness franchising industry has been jolted. The allegations against founder Anthony Geisler, spanning his involvement in a boiler room operation to questionable business practices, have cast a shadow on the company's reputation. Contrary to claims, records indicate that over 30 stores have permanently closed, prompting questions about transparency.
Geisler's history have been marred by allegations of scams. Disparities among franchisees, financial struggles, and overcharging complaints have also surfaced, raising concerns about the company's practices. Additionally, the discrepancy in defining closures and terminations has created further ambiguity. As time unfolds, the ultimate trajectory of Xponential Fitness remains uncertain.