A Closer Look at the Boutique Fitness Industry

Transcription:

Leslie Kuban:
Lou, welcome to the show.

Lou DeFrancisco:
Thank you, Leslie. Great to be here.

Leslie Kuban:
Tell us a little bit about Xponential Fitness. You guys are a unique animal. And what is unique about you guys and why does that matter?

Lou DeFrancisco:
Yeah. So I’ve been in boutique fitness for 18 years now, 18 plus. And Xponential is unique in this space because they’ve gone out into the market and acquired different verticals within this boutique fitness space. Whether you call them different verticals, different modalities, they’re all different types of workouts so that they don’t compete with each other. And it’s all franchise locations. So as you know franchising it’s, its own world, and it’s unique in a lot of ways. And Xponential is the first to do this aggregating a bunch of different brands underneath one umbrella in the boutique fitness space.

Leslie Kuban:
So tell us about your brands. Give us the rundown of the different modalities and the brands in them for our viewers.

Lou DeFrancisco:
Yeah. I would love to. So some of these, I’m sure some of your viewers have heard of. So Xponential Fitness really started with Club Pilates, that was the first brand. Before Xponential Fitness existed, Anthony Geisler, our CEO and founder had Club Pilates, which has grown to become our largest brand with over 750 locations around the US and expanding internationally. And then after Club Pilates, Anthony went into acquisition mode, which is how we came across all of our future brands. He purchased CycleBar, which some of you may have heard of as well, a indoor cycling studio. Our other large brand is Pure Barre. Pure Barre has been in the boutique fitness space for a long time now and is a very strong brand. So we were excited when were able to purchase that brand, that was made a big deal in the boutique fitness market. They have over 600 locations now. And then those are really what we call our core brands. And it’s rounded out by YogaSix, which is our yoga brand.

Leslie Kuban:
Yes. When we were chatting that you really like being a part of the startup phase, and it’s interesting at Xpo it’s this unique combination of acquiring larger brands like a Pure Barre. But then acquiring much smaller brands, they have good bones to them and adding some of the infrastructure and efficiencies and marketing expertise. So franchisees of these really young brands still get benefit of larger infrastructure. Maybe speak a little bit more to that if you would, Lou.

Lou DeFrancisco:
Yeah, I would love to. I mean, it’s almost an unfair advantage. I’ve been on the side of a young and small franchisor, so that’s where I got my start in the franchise space. It was a small boutique fitness franchise, one brand, 30 locations when I started, very, very small corporate office. And the beauty of franchising is that it allows a franchisor to be small and efficient with their money and with their staffing. What I’ve told franchise prospects, the advantage that Xponential Fitness has over another franchisor in any space. This isn’t just boutique fitness. But we are experts in marketing and sales.

Lou DeFrancisco:
And the internal saying we have is, we are a marketing and sales machine disguised as a fill in the blank. And you fill in the blank with one of our brands, because we know how important it is. At boutique fitness, the beauty of it is, it’s a monthly recurring revenue business model. Xponential knows that we market and advertise to help drive leads into the studios for our franchise partners. We teach them how to convert those leads into first visits. We teach them how to convert those first visits into paying members. And we’re constantly looking at ways, how can we at the corporate level drive more leads and drive more revenue into the studios. And that’s hard to do when you’re a small or a brand new franchisor.

Leslie Kuban:
And I’ve heard you guys really speak to that pre-opening marketing playbook and how important that is. And really the special sauce to franchisees experiencing a quick ramp up is that. And you’ve got to do your part as the franchisor, but they do as well. And implementing the local ground game. Is that so, Lou?

Lou DeFrancisco:
100%, it is. And any monthly recurring revenue model, business model, traditionally can do some kind of presale we call it, and boutique fitness is perfect for this. Where when a franchise partner is executing a lease ready to sign a lease, we teach them how to start presale, which is selling memberships before your doors are open. And there’s a way to approach that where you can get people to sign up before the doors are open and before the construction even begins. And Xponential Fitness really takes us to the next level with the customer support that we provide. We call them franchise partners.

Lou DeFrancisco:
We’re in the royalty business. We’re 7% partners with them. And the better that they do, the better we do. The more revenue they generate, the more revenue we generate. And so we really start driving that home at confirmation days, and then through trainings. And we coach them and have weekly check in calls when they have their pre-sale, soft opening, grand opening. Those are different touch points along the way. But on a weekly basis, our teams are coaching these franchise partners through every step of the way. And if there’s ever a bump in the road, which there typically is somewhere, this is why you want a franchisor there, because we’ll help you.

Leslie Kuban:
Well, speaking of stumbling blocks, the boutique fitness industry has certainly seen a couple of ups and downs over the last couple of years. And hopefully things are normalizing and growing. And I’d love your perspective on the outlook of boutique fitness, the industry as a whole now that we’re midway through 2022. What are you guys seeing?

Lou DeFrancisco:
Yeah, we’re excited. It is. We’re obviously very bullish on the future of boutique fitness. One of the things I always say is boutique fitness has been a fad for the last 20 years. It’s not going anywhere. If anything, I think the silver lining living through COVID is that it’s going to create more awareness for our general population of the importance of moving your body, making sure that you’re careful what you’re putting in your body and the importance of community. At the core of what makes boutique fitness special and unique is that sense of community. And that’s always been the case since day one. And it’s a group of like-minded people getting together to do something that they all love doing, and whether it be cycling or rowing or Pilates or yoga. And that’s what we’re seeing a strong return to. And it’s great to see a lot of our recent revenue growth, our new members coming into our Xponential studios.

Leslie Kuban:
A lot of people think franchising it’s all these huge companies global juggernauts, but the actual number of publicly traded franchise companies is a pretty small club. So let’s talk about that for a couple minutes. What does that mean for your existing franchisees or prospective franchisees that you are a publicly traded company?

Lou DeFrancisco:
Yeah. Overall it’s a positive. There were definitely when we were talking about going public, when it was in the news when we were getting ready to, a lot of franchise partners and franchise prospects they asked that same question, like what does that mean for us? And in general, the answer across the board was, it can bring more stability to our company as well as more accountability. So instead of being a private company where you don’t necessarily know what’s going on, we get audited every single quarter, we have quarterly earnings calls, everything is out there in the public sphere, and that brings a higher level of accountability.

Lou DeFrancisco:
And I think that’s a good thing in general for franchising, because we always walk this line of trying to have good franchisee relations, making sure that we’re on. And now we walk that line of our shareholders and making sure that we also have really good communication and good relations with our shareholders. And there’s parts of it that add challenges, but overall, it’s a positive for all of us. It allowed us to raise some money. It allowed us to continue to set us up for future success. It allows us to continue to invest in the future. And that’s a big part of where we’re focused on over the next couple years.

Leslie Kuban:
So that’s a whole other level of support and infrastructure already in a large organization. But it sounds like you guys are handling it well. Glad to hear that, Lou. So just as we start to wrap up here, just any particular new initiatives or opportunities you guys are going after in the balance of 2022?

Lou DeFrancisco:
Yes. There is. Technology is always or should be at the forefront of any brand or any company as they’re looking to the future. And it’s been no different for Xponential Fitness. And one of what ended up being a really smart move, well, before pre COVID that Anthony did is that we bought a production facility across the street from our corporate office here in Irvine. And all of the brands pre COVID before obviously no idea that COVID was going to happen. We started filming digital content for all of our brands. So when COVID hit, we had a little jump where we had a ton of video content available for all of our brands. And when we had to shut down almost all of our studios, we had all this video content that we were able to share with all of our members for free to be able to access and do workouts at home, outside, in their homes or apartments, wherever they were.

Lou DeFrancisco:
And that was a plan to have some digital content as a supplement to our four wall experience. And so that is what today we call Xponential+ or X+, that’s our digital video platform. And then the other big technology initiative that we launched at the end of last year across the nation was XPASS, which is different than X+. XPASS is our internal ClassPass. If anyone is familiar with ClassPass. So XPASS eventually will be all 10 brands that are on this internal membership plan. So anyone, whether they could be an existing Xponential Fitness member, or maybe they’re not a member to any four wall studio, they pay a monthly fee, they get a certain number of points and those points can be used for classes. And XPASS they get to use any of our Xponential brands. So we’re excited about this. We launched it last year with eight of our brands. Rumble will be launching on XPASS and then BFT will be also launching on XPASS shortly.

Leslie Kuban:
What a great way to… Maybe this is a bad analogy, but having the taste of the ice cream before committing to the whole cone, and then you go to one of your Xponential Fitness studios after the ice cream cone.

Lou DeFrancisco:
Exactly. Exactly. So it’s a way for us to drive more testing and more snacking and drive more leads into our franchise partner studios. And we know a certain percentage of those people. So the franchise partner will get paid for delivering class to that XPASS person, but they’re also giving that franchise partner the opportunity to sell a membership to that person. And they may be interested in membership too. So it’s a way for us to reach more people. Xponential’s mission is to bring boutique fitness to as many people as possible. And this is another way to do that. It’s not just four wall, it’s digital which has a monthly membership plan, as well as XPASS which gets people that are not ready to commit full time to allow them to test all of our different brands. And that’s why, again, it’s unique. Xponential fitness has all these brands that are complimentary to each other, none are competing and you can go into multiple brands to achieve whatever goals you’re trying to achieve.

Leslie Kuban:
Well, that’s exciting to hear about all the investment in innovation, which I’m sure is going to continue out there in California and across the nation. Well, Lou, this has been a very informative interview. I’m really glad that you joined us and shared about Xponential with our viewers today. And look forward to catching up with you again and see what other investments and opportunities are coming forth in the organization. So thank you so much for joining us this afternoon.

Lou DeFrancisco:
Thank you, Leslie. Great to see you and just appreciate you having us on.

Leslie Kuban:
I sure appreciate you joining me on Atlanta Franchise Today. And I look forward to seeing you next week.