With the rise of the health and fitness craze, private equity investors have begun to view boutique fitness studios - specialty fitness centers that offer a unique kind of workout - as potentially very rewarding investment opportunities. It is important to capitalize on the changing manners in which consumers are spending their money: less on physical, material goods and more on experiences, such as trendy workout classes.
Privately-owned boutique fitness studio Xponential Fitness recently closed a deal to acquire Pure Barre, the largest barre studio in the United States, with over 517 studios that utilize isometric movements to develop long, lean muscles. The financial terms of the deal were not disclosed. In 2015, private equity firm L. Catterton, which holds $15 billion in equity in various retail companies, invested in Pure Barre; it will now roll over its investment stake to the acquisition and become a minority owner of Xponential Fitness. Presently, Xponential owns a diverse portfolio of fitness facilities, each with a different niche: Club Pilates, CycleBar, Stretch Lab, Row House, Yoga Six, and AKT. The barre workout is becoming ever-more popular, especially among females, so this acquisition would allow Xponential to tap into a new fitness market. After this deal is closed, Xponential Fitness, founded only in 2017, will be the largest boutique fitness company in the world.
Xponential Fitness CEO Anthony Geisler first purchased Club Pilates in 2015 and then continued to acquire other boutique fitness studios, expanding and implementing new strategies to ensure the success of each one. Xponential allows for independent operations of each of its companies because each brand attracts a specific kind of individual due to the respective lifestyle portrayed by each brand. Xponential has placed an emphasis on international expansion of its brands. Right now, the company plans to open over 30 CycleBar studios across the United Kingdom within the next 5 years, but it will continue to internationally franchise its other brands. Young adults around the world are just as captivated by the ever-growing ways to work out as those in the United States. The other main goal of Xponential Fitness is to continue the acquisition process in order to dominate the sector by encapsulating fitness clubs that specialize in every preferred form of exercising. However, before making an offer on a boutique fitness studio, Xponential needs evidence that the studio is not just a fad, that it can sustain its relative popularity for the long-haul, and that it offers a distinctive value to consumers.
Former TPG partner Mark Grabowski launched private equity firm Snapdragon Capital, which focuses on middle-market companies relating to health and fitness, and recently took control of Xponential along with Geisler. So far, Xponential has exhibited massive success in making Club Pilates a household name, and it will likely do so for the other brands, including Pure Barre.
By focusing purely on boutique fitness companies, which can be expensive, averaging around $25 for a single class and upwards $70 per month for a membership, Xponential exposes itself to the risk of market cyclicality. However, Xponential has a solid market position and its portfolio creates high barriers to entry for another boutique fitness conglomerate. Xponential’s market share is rapidly growing with each new acquisition and should continue to become more profitable by, if nothing else, the tailwinds of the wellness industry.