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Boutiques Will “Crush” Big Box Gyms

According to Anthony Geisler, CEO of Xponential Fitness, the company’s acquisition spree is over, saying “that’s it for now.”

Starting in 2015 with the purchase of Club Pilates, Geisler and Xponential have been hard at work building a portfolio of successful boutique fitness studios. In the time since, the company added seven concepts, including CycleBar, StretchLab, Row House, AKT, YogaSix, Stride, and Pure Barre. Now, with eight brands under the Xponential banner, the focus is shifting from scooping up studios to setting up franchises the world over. In Geisler’s words, “we’ll expand all of our eight brands internationally, but we’re not looking at any more acquisitions.”

Given Geisler’s previous experience as the owner of LA Boxing Club, where he scaled the business to nearly 200 locations before selling to UFC GYM, onlookers (including me) speculated that he might get back into boxing. But Geisler shot that idea down. Given the number of studios in the mix, including iLoveKickboxing, UFC GYM, TITLE Boxing Club, 9Round Fitness, CKO Kickboxing, EverybodyFights, Mayweather Boxing + Fitness, and others, there wasn’t an opportunity to create a truly differentiated concept or value proposition.

The latter two points are essential to Xponential’s winning formula. “Xponential wasn’t ever intended to cover all modalities,” Geisler said. Adding, “I want to be the best and biggest franchised brand in each area – I don’t want to go into a market and be number two.”

Looking at the studio landscape, this rationale checks out. Take Orangetheory Fitness for example. Having already signed more than 1,000 leases for prime locations, the studio is likely gaining exclusivity on HIIT training in the shopping centers and developments they’re entering. So, instead of trying to create another Orangetheory and going head-to-head on HIIT studios, Geisler selected concepts that could define a category, saying “I can go in next door to [Orangetheory] with a rowing brand or a running brand.”

If you look at SoulCycle’s expansion curve, in my opinion, it’s over. They can’t put more locations in Manhattan, Chicago, Seattle, Los Angeles, Dallas. They’re done – and that’s why the business today is worth less money than it was three years ago. There’s no more growth, nobody [can buy] SoulCycle and make money…” — Anthony Geisler, Xponential Fitness CEO

Xponential doesn’t want to compete on head-on with a specific concept, and it’s also true that they aren’t interested in competing for certain cities. While Geisler is willing to concede that SoulCycle and Flywheel may be better known than Xponential-owned CycleBar, he’s quick to point out that CycleBar has 50% more locations than SoulCycle and Flywheel combined.

However, in Geisler’s opinion, SoulCycle and Flywheel erred on two fronts: First, by making their product too expensive, they priced out operators and customers in smaller markets. At the same time, these studios also maxed out their presence in larger cities. Meanwhile, Xponential positioned itself to serve an entire segment of entrepreneurs and exercisers in cities like Louisville, Kentucky, who are clamoring to open or work out at SoulCycle or CorePower Yoga but don’t have access. CycleBar, on the other hand, is accessible for both parties.

So, if everything goes according to plan, what’s next for Xponential Fitness? According to Geisler, over the next five years, each of their eight concepts will reach more than 900 locations individually. Over the same period, Geisler expects boutique studios “to crush” big-box gyms as Xponential becomes the leader in the boutique space. As Geisler concluded, “I’m not aware of anyone with more locations or modalities than us even now, nor do I foresee anyone being able to duplicate what we’re doing.”