Ever wondered what it’s like to run one of the fastest-growing franchises in the country? Lou DeFrancisco talks us through his journey leading StretchLab’s growth from infancy to over 700 studios in development. He also takes a deep dive into multi-unit franchise ownership and how StretchLab found success setting their franchise owners up to take advantage of opening multiple locations. Lou also demystifies “fitness franchises” and shares some from-the-trenches insight about owning and operating them successfully (and why you don’t have to be a trainer or fitness professional to be successful). And at the end, he gives us a glimpse into Xponential Fitness’ newest brand, Body Fit Training (which he’s now President of).
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What It’s Like To Lead One Of The Fastest Growing Franchises In The Country With Lou DeFrancisco
Lou DeFrancisco was the President who helped take StretchLab from an emerging franchise to over 700 franchises in development.
I am super excited to be talking with one of my friends who I’ve gotten to know well over the past few years, who is a part of a company and has played a key role in a company that has become one of the biggest, baddest, and I mean that in a positive way, things in franchising. Lou, welcome to the show, my friend.
Thank you, Dru. Thanks for having me.
I’m honored that you are here. I’m looking forward to talking about all the interesting things that you’ve been a part of and this new opportunity, this new brand that you’re heading up. In the spirit of the show, what we do here is talk about folks that have gone on to use franchising to have success professionally and personally. I’d love to dig a bit into you and get to know you better in terms of how you got into this organization called Xponential Fitness that we’ll talk about and now leading up their brand-new brand called Body Fit Training, which is super interesting. I’ll kick it over to you. I’d love to hear a little bit about your story.
As with a lot of stories, there are a lot of twists and turns. You don’t just get here on a straight path like a lot of entrepreneurial stories. My quick background, I’ve been in health and fitness for many years now and in this world of franchising in the health and fitness space for several of those years. It’s not an accident that I’m here. That’s one of the best parts of the story. I don’t think anyone can appreciate where they’re at unless they’ve started in places where they weren’t happy. Where I sit now, I’m happy. I’m having fun. I’m doing something that I love. Rewind back to post-college days. As with a lot of people coming out of college, it was, “I need a job.”
I found a job in IT consulting. No offense to anyone out there that’s in IT consulting. It’s a fantastic career for the right person, but what I learned in those early days of post-college and 9:00 to 5:00 working and I’m on my own. I got to provide for at least myself for a short period of time. I need to work. It was a grind. Looking back now, I can say it was a grind because I didn’t enjoy what I was doing. I was doing it for the paycheck. At the time, I’ve always been a learner. I love reading books. I love reading business books. At the time, I was super interested in business, but I didn’t have any business degree. I had a science degree. I was a Physics major of all things in college.
I was a Psychology major.
I wanted to challenge myself ultimately was why. IT consulting, I was like, “This was a small business.” It was interesting. You always have to look for the positive things and where you’re at in life. The owner of this IT consulting company believed in an open book management style, which means he shared all the financials of the business with all of the employees. This was eye-opening to me. What is a P&L? What is a balance sheet? I had no idea. I had taken zero business classes in college. Here he is teaching this small company of IT consultants how to make good day-to-day decisions, whatever you’re doing for his business, based on the P&L and balance sheet and our goals.
Light bulbs started going off. I was like, “That makes sense.” It makes sense why he’s not paying us this huge salary, but there are bonuses based on doing these activities or achieving these things. That opened my eyes to this world of business. I started taking classes towards my MBA as I was working. That’s been a theme throughout my career and my life. I want to continue to challenge myself, learn, grow, and develop skills because I’m not where I want to be. That’s been a theme for my personal life. I’ll hit the fast forward button here. It was going to work every day, sitting next to these people that were passionate about IT and computers and IT consulting and working in this industry.
I was like, “One of these things is not like the other. I’ve got to find something else.” I had a good friend of mine that was a personal trainer and physical therapist. He owned his own health club. It was like a private, independent, single-location club. He did a ton of personal training and physical therapy out of it. It was more personal training than anything. He was like, “Why don’t you come to work for me?” I was like, “No, I can’t do that. I’m on this career track. I’m in the corporate world. I’m taking classes towards my MBA. I am on the corporate ladder. I got to keep going.” That’s where this entrepreneurial side of me started to kick in.
It took a while, a couple of lunches, a couple of coffees with my buddy. At the time, I was married. This was the early to mid-2000s. I was just married with no kids. This is what got me. He had to sell me on this, my buddy. He’s like, “Number one, you’re just married, no kids. There’s no pressure on you. It’s not like you’re leaving without a job. I’m going to pay you. You’re going to come work with me, but I’m going to pay you. You’re going to have a paycheck.
Number two, you want a new job anyway. What do you have to lose? If you don’t like it in six months, go look for another job.” No skin off my back. That was what I needed to hear at that time to take the risk. At that time, I associated leaving a job as super risky. Looking back, there was no risk. My wife and I were living in an apartment. We were paying $900 a month. That’s like peanuts.
It’s all in the heat of the moment. It’s all relative.
That was my first big entrepreneurial decision. After I got over the risk hurdle, it was a hell yeah, because it was something that I thought I was passionate about. I’ve been an athlete my whole life. I always worked out, even post-college. My wife and I cook a lot. We’re focused on our nutrition. I was like, “I feel pretty good that I’m going to like this.” I had to get over that risk factor, that risk hurdle. Once I got over that, I was like, “I’m going to have a job. It was so silly. He’s going to pay me the same amount of money that I’m making right now, but it’s in an industry where I could potentially love.”Culture doesn't happen overnight. Like a garden, you have to weed, nurture, and feed it. It’s the same thing with business. For a business to truly be successful, you need strong culture. Click To Tweet
For five years, I worked there. It was some of the best working years of my life. I went from a 9:00 to 5:00 grind in Corporate America to an entrepreneurial gym environment. I had to be there some mornings at 5:00 AM. I was there some nights until 10:00 PM. I was working weekends almost every weekend.
At some point, I was in the gym. I loved it. I fell in love with it. The people that I worked with, all of a sudden, I’m like working side by side with these personal trainers and clinicians. Eventually, we brought on massage therapists, chiropractors, acupuncturists, all these people in this industry of health, fitness, and wellness industry. It was like, pinch me. I can’t believe I get to come in every day and do this and work with them.
I kept making more money. Each year, I was making more money. This is where another light bulb went off of if I can continue to work in an industry that I love, where essentially, I’m not even considering calling that work, because it’s something that I love doing this, I’m also making a difference in people’s lives.
That was important in my own personal passion of I’m not personally delivering the actual physical therapy, but the work that some people are doing on my team is dramatically changing and improving the lives of people. Doing something that I love, changing people’s lives, and I’m able to provide for my family. In those five years, I had my first child. It was like, “I’m making more money. Now I have more responsibility, but I also have a child. My wife and I had plans of having more.”
It was all moving in that right direction. It was awesome, but it reached a plateau. It was like, “I don’t want to lose out on this, doing something I’m passionate about, making a difference in people’s lives, and be able to provide for my family.” Those are my three big criteria. I started looking because I had reached a plateau of where I was going. People do reach this all the time. Anytime I feel like I’m at that place, I start having conversations with people. I found this opportunity. It was a boutique fitness franchise. This was all in the Boston area.
This is where my wife and I lived post-college where she was from. It was young, small, 25 or 30 locations. I knew nothing about franchising. This is like a shot in the dark, but let me apply. It was a job working there. I ended up getting called in for an interview and meeting the owner. The owner loved my background. My main responsibility was running a glorified personal training studio, a larger personal training studio that offered physical therapy but also chiropractic acupuncture massage.
All I was doing all day was I lived at the front desk and talked with people and sold personal training services. He was like, “That’s what I’m looking for. I need someone to go drive around all of these locations and teach my franchise partners how to sell personal training.” I was like, “I can do that.” He’s like, “When can you start?”
That must have been like the forefront of when boutique fitness was starting to emerge as this thing.
It was 2008, early 2009. It was somewhere in that range. It was interesting. It was owned in 2009 because I remember looking back on this time. Essentially, I worked in two different boutique fitness brands during that recession. The interesting part is both of those brands grew in different ways, but the independent health club grew in revenue, which is good. Obviously, you want that when you’re the owner. We grew revenue in that 2008 into 2009 timeframe. The fitness franchise that I went to work for in that time, they had started in 2006, started franchising in 2007. That owner continued to sell locations, territories through 2008, 2009. We continued 2010, 2011, 2012.
I ended up working there for eight-plus years. The last five and a half years, I was there, I was the president of that franchise. We grew it to over 100 locations nationwide. You look back at that time and you’re like, “One, we were able to sell franchise territories to people during the recession. Two, they were signing leases during that recession.” If you talk with them and they look back at that time, they’ll tell you, “That was the best decision of my life.”
The best deal you’re ever going to get right on a lease.
We got this ten-year lease with a couple of options that were the best deal that they would have ever gotten. That was an eight-and-a-half-year blur as well. For me, that’s where I cut my teeth on franchising. I’m a learner. I’m always willing to raise my hand and be like, “I’ll do that. I don’t have any experience doing it, but I’ll try it. I’ll learn it. I’ll learn from it.” It was an entrepreneurial experience as well, which I appreciated at the time because the owner had franchising experience, but in a small and young team of go-getters like, “We’re going to go conquer the world right now.”
I love that environment because he allowed an open to all of us to be able to take on whatever we wanted to take on. I got exposed to franchise sales and what is all involved in that. That’s a whole world unto itself. I got involved in the legal side of franchising and FDD, Franchise Disclosure Documents. I eventually took over managing that process of the FDD every year and working with a franchise attorney. The marketing and advertising of boutique fitness and a marketing fund and what a marketing fund was and what we could spend money on. I ultimately managed the marketing fund for 100-plus locations around the country.
I took over little bits and pieces before I became president. That’s why he ultimately named me president because I showed proficiency and took over all these different areas of the world of franchising. I’m grateful for that opportunity because I wouldn’t be here now if I didn’t have those opportunities to learn without the experience under my belt.
That was your first experience as president of a national brand. Little did you know probably that you would go on to replicate that a couple more times at the time.
I had no idea. That’s the beauty of as you’re growing, and in your profession, you never know where it may lead. What I’ve learned is the world of franchising is, on the smaller side, it’s growing, but it’s on the smaller side than the world of boutique fitness franchising is even smaller. I was on the radar of some people previous to Xponential that started out as Club Pilates.
Anthony Geisler, our owner and founder, had previous experience in boutique fitness with LA Boxing and then with UFC gyms and eventually bought Club Pilates and started growing that brand before he brought in private equity and started this world of Xponential Fitness or this brand and company of Xponential Fitness. Soon after Anthony did that, he formed Xponential Fitness and put Club Pilates underneath that umbrella.
The first real external brand that he purchased was CycleBar. The next brand that he purchased was StretchLab. At some point in that time, it was 3, 6 months previous to Xponential when I first met Anthony because of our being in the world of boutique fitness and franchising. I remember him saying like, “I’m going to do this thing. I can’t tell you much about it, but let’s stay in touch.” Somewhere in that 3 to 6 months window is when he started Xponential Fitness. Soon after, we reconnected, and he said, “I bought this brand called StretchLab. I want you to come run it.
I was like, “Do I learn a little more before I say yes, or do I have to say yes now?” As with any true entrepreneur, Anthony likes to move fast. He flew my wife and me out to California. We meet and talk and talk about the brand. He gave me his vision of what he was going to do. I love these stories because it’s great to take a moment and reminisce.
The first time I met Anthony was in the warehouse space of Club Pilates. When I say warehouse, it was like a true warehouse. He had built this bad-looking semi-private office space in the corner of the warehouse. Outside of his office were two big stand-up tables where Ryan Junk was, who was the just named President of CycleBar. One other person, and two other people, somebody has a small team as he started to form Xponential because he was out of space at Club Pilates. Club Pilates was maxed out in their office space.
He had purchased the beautiful office space that we have now. He had rented it, leased it, signed a lease for it, but it was all concrete. There was nothing in it. In my first 3 to 6 months, we started in that warehouse space behind Club Pilates. That’s where CycleBar not started, but that’s where it started its Xponential story. Where StretchLab started their Xponential story, where Roadhouse started their Xponential story. We had at least three brands working out of that warehouse space until we went into temporary office space for another 3 to 4 months before our actual beautiful home offices.
You were the president of one of the first brands that Xponential took from the ground and took national essentially. Club Pilates had like locations. That was the flagship. CycleBar had a bunch of locations at the time that Xpo purchased them if I remember correctly, but StretchLab did not.
It wasn’t even a franchise. It was three locations in LA. That was it.
I can imagine these probably pretty convincing. Anthony Geysers, you can read about it. He is a visionary and makes stuff happen guy, but you were leading this national boutique fitness franchise brand. There’s this thing called Xponential. There’s this concept called StretchLab. What was it like for you to make the leap? Did you know right away, or were you like, “I don’t know about this thing. Maybe I stay here where I’m comfortable and keep this thing out.”
It was interesting. It was similar in thought process to when I first made that decision and leaped to go from IT consulting into the world of fitness. I’ve reached a plateau. Yes, stable and safe, but I’m not growing anymore. I saw it in Anthony. More so, I wanted to work with Anthony because I saw his track record of growing and selling LA Boxing and being a part of UFC gym, another boutique fitness franchise. Starting Club Pilates, it was a small franchise system and growing it into at least a couple hundred locations that he had before he brought in private equity. I was in an environment where the franchisor was a single owner and that’s how he wanted to operate, which is fine.
That’s his decision, but then I had this opportunity to be a part of another thing. I didn’t even know how to describe it at the time. It was going to be this big thing. I had that gut feeling, being in the industry and seeing Anthony’s track record, I want to have an opportunity to work with that guy and be a part of what he’s doing, because I know it will be special.It takes the right people behind any business or brand to reach its potential, which means execution. Click To Tweet
When was that?
2017? There was that risk factor. When you break it down, it was like an established brand versus a brand new concept in a new modality of stretching. Stretching wasn’t a widely accepted business model. There was risk there. It was interesting because we have this distinct memory, my wife and I, of being here in California without our kids. We left our kids with my wife’s parents. We flew out here. Literally, we were here for a 24-hour window and took a red-eye home. While we were here, it was like this whirlwind tour of Orange County, meeting with Anthony, getting deeper into his vision, and spending time with him. We visited a potential school to send the kids to while we were here.
We knew there was risk involved, but we were at a time in our lives as well where the timing was right, if that makes sense for people. If people are in that place, they’ll know. There were a lot of factors, parents and extended family and our nuclear family at this time. I have three kids now. It wasn’t just one. It was three. They were all in grade school. That was a factor. There’s always a risk, but there when you’re in a career for a period of time, there’s a certain level of trust that you need to have in yourself in your skill set, as well as where you’re going and who you’re going to be working for and with, and those check the box for us, um, in order to be able to make that leap personally, because professionally, it was going to be this cool opportunity. If it was a cool opportunity that didn’t grow as fast as it grew, it was still going to be a cool opportunity. What it turned into was something pretty amazing.
You packed up your family and young kids, moved across the country and started heading up StretchLab. Fast forward four and a half years. What happened with StretchLab and Anthony’s vision for Xponential?
Six hundred territories sold and 150 open through a worldwide pandemic. It’s no big deal.
Being headquartered in California. Being a part of a company going public. Soon after, a fitness conglomerate empire going public in the middle of a pandemic. You can’t draw that story up no matter who you are. I don’t think you could write that one up the way it turned out.
The parent company continues to purchase additional brands. We have ten brands now. BFT was purchased towards the end of 2021. Rumble was purchased earlier in 2021. Right. Eight brands, and then we hit the pause button for a little bit, and then we purchased number nine, which was Rumble, and then number ten, which was BFT. It’s a crazy story.
The crazier part is when I talked with Anthony early before I took the job. When I sat across from him when we were driving around and walking through this office space that I’m sitting in right now, he told me his vision. My thought process was, “If this dude even gets close to hitting these, it’s going to be fun. This is going to be cool to be a part of.” This is the entrepreneurial way. You aim for the stars. If you land on the moon, it’s pretty amazing.
You got to listen to your gut, too, I’d imagine. At some point, you can have all the data and think through it, but you got to listen to that thing inside that’s pointing in a certain direction or trying to tell you something that you can’t always make out. It doesn’t make sense. You just have that feeling. I’m sure Anthony and the team were a big part of what gave you that warm and fuzzy to feel comfortable making that big life change.
At any time, we’re talking about the show here, so something that’s relevant for your readers is I was in the grind in health and fitness and then in franchising for a total of twelve-ish years before I jumped over to Xponential Fitness. That jump into this world of Xponential fitness, was there a risk? Of course, but I knew what I had in terms of a skillset, and I knew I could add value. I also saw what Anthony was putting together from him and his team that could pour gasoline on the fire of what we were going to do. I knew with the right team and people, the sky’s the limit because Anthony knew what it took to grow a business.
He was going to get better and stronger. I knew what it took to grow a franchise business with that experience. Now the second time around at StretchLab, I felt like I could do it better and faster with Xponential’s help because I couldn’t have done it without Xponential’s help and expertise. One of the things that I hope resonates with a lot of your readers as they’re considering this world of franchising. I say this all the time as I’m training franchise partners and through what we call our franchise training, it’s all about people.
Another word for people is culture. Your people are your culture. I go through this big, long training during franchise training to try to teach people that maybe have never owned their own business before. Hopefully, they’ve been in a role of managing people, but maybe not to this level of like, “I’m going to manage my team, but I’m the owner now.”
You want to look at it as an opportunity. It’s this opportunity to establish the right culture from the beginning. Culture doesn’t happen overnight. Culture, like a garden, you have to weed, nurture, and feed it. The same thing with the business. In order for a business to truly be successful, you need a strong culture.
I knew what Anthony was building an Xponential was a strong culture because he already had a strong team around him at Club Pilates. He had a strong president in Shaun Grove, who is now the Rumble president at Club Pilates. Sarah Luna was working underneath Shaun Grove at Club Pilates. Sarah Luna went on to be President of Pure Barre when we bought Pure Barre.
Now she’s the President of Xponential. Anthony has the right mentality and mindset of like, “I can’t do it completely on my own. I need good people around me.” I saw that. I knew that from my previous experience. When I started building StretchLab team, I was like, “I’m going to do the same thing. I’m going to make sure I have a strong team.”
What did that look like? I feel like part of me got lucky. I was able to hire some good people early on, but I also had to make some tough decisions early on. I had to let a few people go early in StretchLab world on the corporate side because I knew what I needed. I had grown a franchise to over 100 locations. I knew what was going to happen in the next 1, 2 or 3 years, not predicting COVID, but knowing, “I know we’re going to sell a lot of territories because we’re Xponential fitness. We’re going to need to get a lot of studios open.”
I had Club Pilates as this blueprint or roadmap that I could look at to be like, “In their first 1, 2, 3 years, this is their trajectory. I need people that are not only going to be good today with only 3 and then 4 and then 5 and then 6, 8, 9, 10 locations open, but I need people that are also going to be able to scale their skillset and continue to be good and proficient and build this brand with me when we have 25 locations open and then 50, and then 75, a 100 plus.”
This is the best part of the story that I love. How did I get into being named BFT President? It wasn’t because of selling 600 territories and opening up 150 locations. That was good, obviously. It was because of the team I built that Stretch Lab. I could move over here, promote one team member that I had been grooming, and the clarity around what Anthony and Ryan Junk, who was the CycleBar President, who is now COO of Xponential Fitness. We have this trend of promoting internally and building a strong culture, getting your experience in the brand and promoting from within. I did the same thing inside StretchLab, and Anthony and Ryan, the clarity was StretchLab is a hot brand.
It continues to be a hot brand. It’s going to continue to be a hot brand. If we take Lou out of StretchLab, it can’t do a nosedive. I had known this for years. It’s an important skillset for a leader. I looked at my job as President of StretchLab as taking this brand and running it, but it couldn’t be dependent on me and the success of it was just dependent on me. It needed to be the team and all about StretchLab. As much as possible, I tried not to make it about me. I knew I had a role of making sure we were selling territories, finding good franchise partners, and selling territories and getting them open.
That meant I needed to manage my team and the things that they need to do on a day-to-day basis. We have a fantastic new President of StretchLab. Verdine baker is his name. I hired him as our National Sales Director. We worked together for those four years that I was there. It was data not only day in, day out, but evenings and weekends.
We were connected at the hip. The franchise partners had this appreciation and respect for Verdine. My corporate team had an appreciation and respect for Verdine. Xponential knew what his skillset was. It’s no big deal. The best part of the story was that StretchLab continues to crush it. He continues to carry on that legacy of StretchLab being the leader in this world of assisted stretching.
Even from the beginnings of StretchLab. It’s a cool concept. Stretching hasn’t been done before, but the concept is the concept. It takes the right people behind any business or any brand to help it reach the potential that it’s going to reach, which means execution. You guys had the playbook and the formula that you know works, but you have to execute it consistently.
You have to help the franchisees execute it consistently within their areas and their markets. It sounds so simple. There’s a lot of hard work, a lot of the right mindset, and getting the right people in the right places goes into that. Once you get it, you can see the results of what you guys have done with StretchLab. StretchLab is one of these businesses. I call it the sleeper of all sleepers.
People look at it. They’re like, “What? Stretching?” I’m like, “Yeah,” but it’s not just stretching. It’s Xponential. There’s a vast market for customers and people who can benefit from stretching. It’s such a cool concept because it’s underestimated a lot of times. When you start peeling back the onion and you see in the business, and then you see the team of people behind it, you’re like, “This is a monster in a good way.”
It’s a part of this world of health and fitness, but it’s more wellness. One of the benefits that as a society we’ll get coming out of COVID is a deeper focus, more focus on health, fitness, and wellness. That’s why Xponential Fitness is poised to continue to be super successful in the future. We have nine fitness brands and then one wellness brand in StretchLab. Who knows where this will continue to go? I’m not on that side of the business to figure out. Are we going to buy more brands? What brands are they going to be? Where are they going to fall? I’m sure there will be more acquisitions in the future.
The nice part about Xponential Fitness as a parent company is that we are focused on making boutique fitness and wellness accessible to the masses, everyone. In my personal opinion, it was a big miss from our government and society, whoever you want to blame and point fingers at, during COVID. One of the first things they shut down was fitness. What did we learn about COVID? We didn’t know what we didn’t know in the early stages, but your cardiovascular health is critically important. If you get any virus or the flu or COVID, your cardiovascular health is incredibly important. How do you impact that? You move your body every single day. Be careful with what you put in your body.If you're considering franchising, you want to look at who the franchisor is. Is this the brand that has long-term staying power? Because the world of franchising continues to grow and grow. Click To Tweet
You try to put good stuff in your body. If you do those two things consistently, you’re going to be healthy and you’re going to live a long life. That’s what we’re all after. Longevity and quality of life. Boutique fitness and wellness is well poised to take advantage of people that are prioritizing that more and more. It’s no longer a luxury.
Boutique fitness is no longer a luxury. Even some of these wellness concepts like StretchLab, it’s no longer a luxury. It’s like, “In order for me to live my best life, to be the person I want to be and to achieve what I want to achieve, I know I need to move and take care of my body and also make sure I’m putting good stuff in my body.” I won’t get into the nitty-gritty of food and supplements and spend hours on that.
It’s a huge and growing industry, boutique fitness and wellness. It will continue to grow. That’s the fun part about this is that the sky’s the limit. Not just for Xponential, but for other brands as well. This is an industry in which we always joke, saying boutique fitness has been a fad for the past several years. It’s not going anywhere, people. It’s here to stay. There’ll be brands that come and go. If you’re considering franchising, you want to look at who the franchisor is. Is this the brand that has long-term staying power? You see this more than I do, Dru. The world of franchising continues to grow. That’s a good thing too.
There are more and more brands that decide to franchise every single year. The world of franchising is maturing and growing. This is where your value, Dru, as a franchise consultant comes into play because how does a consumer, someone that’s potentially interested in franchising but hasn’t spent the last 10, 15 years, like we have in franchising, how do they navigate this world? I tell people all the time, “Talk to a franchise consultant. Don’t take my word for it because I just work in this one little brand.”
One little brand, but this one little publicly-traded company. No big deal. You’re right. Especially first-time franchise owners or first first-time business owners, they’re thinking about franchising. Everybody falls in love with the idea of owning their own business, the seduction of a concept or a brand.
They see something they’re like, “I’ve been thinking about that business. This is it. They’ve created this.” That doesn’t mean anything. The story that you shared, the people behind the brand, that’s the stuff that makes the difference. That’s the stuff that separates the great franchises from the ones that maybe you’re good and the ones that aren’t so good. It’s all this stuff behind the scenes. It sounds like you recognize that too.
After your rise with the first boutique fitness franchise, taking that nationally, Anthony did a good job of bringing in the right people, but it sounds like you also did a good job of bringing in the right capital. There was capital there to fuel the growth and building a franchise system is no small fee like this. A lot of people, even franchisees, think that, “I paid this franchise fee and I paid these royalties. That money is going to this corporate office. They’re getting rich.” A lot of the good franchise companies are reinvesting that money right away. They’re losing money for many years until there’s a critical mass of the royalties.
The royalties are where you want a franchise company living off of, not the franchise fees. It’s one of these things that, candidly, it’s hard to get people to appreciate a lot of those layers that go into figuring out if a franchise is the real deal and has the right pieces and people in place to take it nationally or where it doesn’t. Any company can franchise, to be honest with you.
That’s the scary part. That’s why it’s important that the franchise industry matures. It is maturing. The allure of franchising is to quickly grow a brand nationally with little capital behind it. “My franchisee is going to not only pay me a franchise fee to have a territory, but then they’re going to foot the bill to get open. I just have to teach them.” There’s way more to it than meets the eye.
A bunch of years ago, I remember there was this controversial article and franchising that came out. A well-known franchise consultant wrote this article in one of the franchise publications. The general idea was that if you’re thinking about franchising and becoming a franchisor, you need at least $1 million to $2 million to appropriately launch a brand and be a sustainable long-term franchise.
He caught all this flack because, at the time, it was popular to start franchising your business and this whole idea that you could do it for little money. That was early in my franchising days. I agreed with aside, like, “You can franchise for little money. What do you mean $1 million to $2 million? That’s a crazy amount of money.”
Get an FTD. We’re good to go.
You need to pay an attorney to draft. This was at least ten-plus years ago. The good news is franchising and the industry continues to mature. Franchising is governed by the FTC, the Federal Trade Commission. Whether we like it or not, more and more attorneys and litigate litigation have happened in franchising. Overall, it’s a good thing because it’s making the franchising industry mature. The more mature brands are solidifying themselves for being here for the longer term.
The younger brands that are trying to launch on the cheap are realizing, “I can’t because more educated people are coming into franchising, looking behind the curtain and saying, “Let me look at your balance sheet. Let me look at your P&L. How many franchise territories have you sold? How many have you opened? How are they doing? Not just your one corporate location, but how are franchisees doing? Let me talk to them.”
All these different areas of franchising, we’re starting to shine more light on not only corporate-run locations but also franchisee locations and validation. Xponential does a good job of investing in the brand. That’s a lot of people underestimate and where a lot of that $1 million to $2 million or whatever it is, it’s more now. You should need more now because it’s not just throwing an FTD together.
It’s having either multiple locations that are operating, not just one. One store in the best location possible in the entire United States. Of course, it’s doing well. You need to have multiple locations and franchisees. Early on, it’s healthy to have a somewhat slower growth of a franchise if you don’t have a lot of capital because that’s how you’re going to grow.
Success breeds success. Even if you’re growing fast, like Xponential has, we still have an intense focus on those first 5, 10, 15 locations. If they’re not all wildly successful, then we invest more time and money into ensuring they are wildly successful. That’s what a good franchise or should do because that’s the only way to eventually have 100, 200, 300, 400, 500, 700, 800, 900 locations is to prove the model early. You’re going to make failures and mistakes, but you have the infrastructure, capital, and support to fix those mistakes so that you can keep growing.
There’s an evolution of franchising that’s happening because now it’s getting pretty sophisticated in terms of what the good franchise companies are doing to implement in terms of infrastructure, software, marketing, digital ad campaigns and all different things to help their franchisees be successful. At the end of the day, if you boil it down, if you help the franchise owners be happy and be profitable, you’re generally going to be okay as a franchise company.
You hit the nail on the head. Those two things are the most important for a franchisor. Are your franchisees happy? Are they making money? They’re related. Your job and my job are aligned in that any franchise prospect, we want to get them into a franchise concept that they would like and that they can be passionate about. That’s a part of the happiness factor.
Are they doing something that they’re pinching themselves every morning saying, “I can’t believe I get up every single day and go work in this industry?” It could be food, fitness, or cleaning windows, whatever their passion is. That’s important that we help them find that and then help them make money at it. As a franchisor, I tell my team that all the time. Are they passionate about what they’re doing? Are they making money?
Let’s help solve both of those. If they’re not making money, we can help them figure out how to make money because we have those systems in place. We do marketing in boutique fitness better than anyone. We do sales in boutique fitness better than anyone. The customer experience inside each brand, we do it better than anyone.
We’ve got those pieces of the puzzle figured out. What I can’t necessarily solve for but I can help with is, are you passionate about this? Are you having fun doing this? I can lay out for you. Here’s what you have to do. If you’re not happy doing it, then I didn’t do a good job, or you, Dru, didn’t do a good job in finding the right franchise concept for them.
This is one of the big points we can dig into and clarify a little bit, especially for first-time franchise owners who might be reading. You’re not looking for somebody who’s passionate about stretching somebody out on one of the tables in the StretchLab. Even in your new brand, BFT, you’re not looking for the owner to be the instructor that’s at the studio every single day, teaching every single class.
Obviously, they have to be aligned to be passionate about the idea of owning a business that is helping people live a healthier lifestyle and having an impact on their lives, but they also have to be passionate about building a team of people. That has to scratch a big itch that they have because that’s what your whole model is built around.
You don’t want the owners involved in the day-to-day and interfacing with the customers too much because if they are, then they’re not scaling the business to what you guys know the potential of these businesses can be. You’re looking for folks to come in and build a team, hire a manager, work through their team, create the culture like you talked about.
They then execute the proven moves you guys have developed that you know work, digital advertising, sales, and all that stuff. It’s a small detail, but it’s a massive detail. There are a lot of franchise companies that want the operator. They want the owner to be the instructor, teach the classes and do all that, but you guys don’t want that.You can't clone yourself and be in two locations at once or three or four or five. The next best thing is to have the right people in place to establish the right culture. Click To Tweet
Probably 5% to 10% of our franchise are people that are coming in. We call them owner-operators. That’s what they’re looking for. We can accommodate that. We’re not going to say, “No, you can’t do that.” You can, but we believe the beauty of franchising and the big picture opportunity and franchising is scaling.
What the systems of any franchise system should give you as a potential owner is the ability to scale. When I say scale, I mean owning multiple units. That’s what gets us excited. I also had the experience in the brand I was operating before I came to Xponential where we had five corporate locations. We had a franchise system of over 100 locations.
I always call it my day job. I was the president of the franchise with 100 locations. My side hustle was I was operating five locations. I didn’t personally own them, but being the president of the franchise was also my responsibility. It didn’t start with five right away. We took one on and we were like, “I can do this. Let’s take a second one on,” and then there was a third and then fourth and then a fifth. I love telling that story in franchise training to all of our franchise partners because I’m not sitting here in an ivory tower saying, “This is the best practice of what you should do. Don’t ask me any details because I’ve never done it before myself, but this is what you should do.”
I’ve been in the gym at 5:00 AM. At 10:00 PM, cleaning toilets, living at the front desk, working weekends, jumping in to teach classes when needed. I lived that and I loved it. Do I want to do it all the time, every single day? No. I liked the business side and I want to scale. In those franchise world, I got to live and breathe. I have a full-time job over here with responsibilities because that’s what supports my family, but then I have this ownership responsibility over here of these five locations. I’ve got a GM in each location. I can’t be in all locations at once. I can’t be there selling the membership if a trainer gives notice, like, “How am I going to deal with that?” That’s where I learned the value of what we call internally meeting rhythms.
For anyone that’s looking to scale, it’s simple. You can’t clone yourself and be in 2 locations at once or 3 or 4 or 5. The next best thing is you need to have good people. Back to what we talked about before, having the right people in place so that you’re establishing the right culture. What helps establish the right culture, it’s like a garden. You can’t just plant things and hope they grow into this beautiful tomato plant with succulent tomatoes.
That’s not going to happen unless you water it, weed it, nurture it and make sure it’s getting the right sunlight, not too much sunlight. These rhythms are daily, weekly and monthly. There’s no magic behind it. It’s not like the super secret sauce. Check in with your GMs once a day, so you know what they’re doing and they know what you want them to do. It’s a simple like, “What’s on the plate for today. What are you doing today? How many appointments do you have scheduled for today? How are we getting leads in the door? How are we converting them into memberships?”
That’s the secret sauce of boutique fitness. Some weekly meetings with your sales team so that you’re reviewing like, “Last week, here’s how many leads we had. Here are how many appointments? Here’s how many sales we made. Good job, high five. Not as good as we needed. We need to do better here and here. This week, here are our goals.” Everyone’s aligned. On a monthly basis, full team meeting, everyone on your team. I learned that early on. This is the other part. It teaches people that are new to franchising and potentially owning multiple locations because you can’t clone yourself and be in 2, 3 or 4 locations at once.
You have to delegate. You don’t have a choice as you could be the control freak. You’re going to realize quickly. You’re going to get stressed out quickly and you can’t control everything. You have to delegate and trust, but then you make sure you have a system of checks and balances in place that the old saying trust, but verify. Trust someone to do the job, but your daily and weekly meetings are where you verify that they’re doing the work that you want them to do.
If they’re not doing the work that you want them to do, then you have the conversation. You say, “Dru, I asked you to do all of these marketing activities this week. I asked you to knock on three doors a day this week and you didn’t do it. I asked you to make twenty phone calls each day, and you only made ten. What happened? Did something get in the way? How can I help you?”
That’s where as a multi-unit owner, you need to know enough about what happens on the day-to-day to dive into the details and ask the right questions, but you’re not doing it all. You’re having someone else do it. Running a business is never absentee. That’s another fallacy in this world of franchising, “I’m just going to buy into a franchise.”
Put some money in and the franchise company is going to do everything and going to magically put money into my bank account. It’s funny. As you were talking through all that, I had Steve Hitzemann, who’s a multi-unit franchisee with StretchLab here in Charlotte, where I am. Steve was talking about his meeting routines. He’s also a high-flying executive at a big company. He chooses that life. A lot of that’s a choice by him. He’s doing well. He has four StretchLab studios open. Two more and thinking of scale and past that. He talked about the art of getting into a good cadence of the meetings that he has with his team and key people.
Also, goal setting. It goes back to what you said, being transparent with his team and helping them understand why and what the goals are and putting some nice incentives in place. If the team hits the goals, then everybody can participate in something as the company is benefiting so can some of the employees.
As you say all that, the art of running a good meeting is a skill. It is not just a hold a meeting habit. To say you have the meeting, it is a skill that you can refine over time. As you get better at it, the meetings tend to get more efficient, shorter to the point and everybody gets on the same page. That’s the cadence you can rinse and repeat and a simple thing you can do to scale into multi-units.
It’s the most basic but critical thing that any multi-unit owner can do. Even a single-unit owner, you want to transfer your skillset from being an owner-operator. There’s some value in starting with one location, rolling your sleeves up, and spending a lot of hours early in the business so that you learn the lingo, methodology, and natural rhythms of the business.
We teach this also from a boutique fitness standpoint. We have a monthly sales cycle. Some people have never worked in a business model that has a monthly sales cycle. We have to teach that. It’s important that some early owners that don’t have experience in that, that they spend 3 to 6 months in it. Maybe they’re not the GM, but maybe they’re shoulder to shoulder with their GM running through what this month looks like.
It’s April 20th. Across Xponential, we have a fast start. We have a mid-month close-out. We have a month-end close out. That’s internal terminology to get people used to this monthly sales cycle. Sometimes you got to be in it first to be able to then step away and stay at this higher level. From an org chart standpoint, you always want to be up here. You may have to jump in to be the GM for a moment or be a head trainer for the moment, but ultimately, you still have the responsibility of being the owner.
You want to continue to build that org chart so that one location, you’re building a second location with the same org chart, a third location with the same org chart. You scale the middle where you put in. We call it area manager or district manager so that if GM quits, it doesn’t impact you and your daily life. It’s because you have a district manager that can step in, or someone beneath them that’s a sales associate or sales manager can step up and become the general manager.
As you build more locations, you’re also building out your org chart. A good franchisor will help with that as well. Understand how to scale the business, not just go sign more leases. What kind of help do you need? Go talk with people about funding or lending and sign leases. There’s a lot more to it. A good franchisor will help you navigate all of the pieces of the puzzle that start with financing. There are all kinds of financing out there. That’s a good time also to be looking into franchising. Coming out of COVID was a good time to sign leases. A lot of our franchise partners at StretchLab over the last few years are super excited to sign more leases because they knew they were onto the right brands.
It was going to continue to grow. They had no problem signing leases. The org chart and the people in the recruiting. When you’re with the right brand and the brand is growing, that helps you to recruit people easier as well. When I’m talking to franchise prospects, “What are you passionate about?” You need to find the right franchisor that’s in that industry that you’re passionate about. Back to my analogy earlier, getting over that big risk hurdle of, “I’m going to make that money, but I’ve upside. I’m going to be in an industry that I love.” There are not a lot of downsides cause I could always go back and look for something else.
I had those risk factors that I had to mitigate. In the world of franchising, if you’re looking at investing in a franchise, passion because it’s not just a job. You don’t want to buy yourself a job. You want to buy something that you’re passionate about because this is what excites you and lights you up every day. The quality of the franchisor has to be there because you want them to be around for much longer than you’re going to be around in the brand.
There are all kinds of private equity that are pouring into franchising now. That’s a good thing. I say that as a positive because they see the value when private equity sees investing in an industry like franchising. It’s because they see long-term value in this. They see this royalty stream as long-term value. They’re going to invest in brands that have long long-term value.
That’s a good thing for all of us in franchising and for any potential candidates that you’re working with that are thinking about franchising because it’s another check the box of franchising is maturing as an industry. This is a good industry to be in, whether you’re investing in short-term. Some of my franchise partners come in and they’re like, “I have a 3 to 5-year window. I want to open three locations, grow and expand, and get my return on investment over that 3 to 5-year window. I want to sell them to someone else. That’s going to be a big chunk of money I get because I’m going to have all my debt paid off by them.”
Other people come in without that mindset and they’re like, “I don’t know what my long-term vision is going to be, but I know I’m passionate about health, fitness, wellness. I want to be in this industry. Maybe it is 5 years, 10 years, or longer. I don’t know, but I know I want to connect with the right franchisor because I have a long-term vision for this as well.”
Speaking of private equity, have you started to see any private equity sniffing around and trying to consolidate or gobble up some franchisees ready to exit across any of the expo brands?
Yeah, we do. It’s slowly starting to happen. When you look at the business side of franchising if is it a good thing or a bad thing, we always say it’s a good thing that private equity is starting to look at not just investing in franchisors but also looking at the franchisee side. They are starting to consolidate with good operators going from not just 3 locations, but private equity looking to go to 10, 25, 50 locations or more. There are some private equity groups that either have already or starting to and looking at consolidating in some of our more mature brands. Some of our younger brands will happen in the long-term because our parent company is Xponential fitness.
I randomly asked that question and I realized, “I got an email from a private investor,” one of these “third-party market research firms” about Xponential fitness. Since you’re publicly traded, I can’t imagine that has much to do with stock investing since all that information is out there. Before we wrap up, I would love to get a quick 30,000-foot view on Body Fit Training, BFT. The new brand that you’re the President of and are leading up. Can you maybe give us a couple of minutes about where BFT is, what it is, and your vision for the brand?In franchising, you don't want to buy yourself a job. You want to buy something you're passionate about because this is what excites you and lights you up daily. Click To Tweet
BFT was the tenth brand underneath the Xponential Fitness umbrella. It’s slightly different from some of our other brands. It’s different from StretchLab. We talked about that. StretchLab is not a franchise. Three locations in LA, new modality. It’s the opposite, where BFT was already an internationally established boutique fitness brand when we purchased it at the end of 2021. Almost 150 locations internationally, but only 2 in the US.
The founders started in Australia. They’ve expanded it to New Zealand and Singapore. They’ve started selling licenses in the UK. It’s another unique part of this relationship with Xponential fitness, Xponential fitness owns the brand now. There’s a transaction. We own the brand. Like all of our other boutique fitness and wellness brands, we will award territories and support our franchise partners in the US and Canada.
We will look to find master franchise master franchisees across the world as we expand. The founders, in conjunction with the purchase of BFT and us becoming the franchisor now, Xponential Fitness is the franchise. We signed a master franchise agreement with the founders. They stay on board. They continue to support their team in Australia, the Australian franchise partners, New Zealand, Singapore, and eventually the UK. It’s been a lot of fun. I’ve jumped in mid-February 2022. A few months of taking over BFT. I transitioned with StretchLab and worked hand in hand with Verdine for a bit as we transitioned and got into the world of BFT. Who is it? What is it? What makes it special?
I’ll give you a couple of key things about BFT and what makes it special. First, I’ll give you the three words that we use to describe BFT. This came directly from the founders. They describe BFT as group strength training. That is who we are and what we do. The founders saw a hole in this niche market of strength training. In the industry, they saw CrossFit on one end of the spectrum, which is a lot of strength training.
For people reading this, if you know CrossFit, you know the details of CrossFit and who they are. They’ve done a fantastic job of building this cult following. They took some of the positives from CrossFit. On the other end of the spectrum, you have Orangetheory and F45. Those are more high-intensity interval training workouts, where you’re raising your heart rate to a certain level multiple days a week.
We took some of what was good out of those brands, too. The founders built BFT group strength training. On average, a member of BFT comes almost five times per week. That’s where it’s similar to CrossFit where people are coming a lot of days per week. How can you come in five days a week and not burn yourself out? That’s some of the science behind BFT and how we differentiate ourselves. We use the thing called periodization. A fancy word in the world of strength and conditioning. That means we’re going to program your workouts so they’re different every day.
These different workouts each day are going to work different muscle groups in different planes of movement and work different energy systems. It’s important and a big differentiator from any high-intensity interval training workout because on average, those high-intensity interval training workouts go 2 days a week and a maximum of 3 days a week, and then your body’s burnt out. BFT is programming the training so that you can come in and work out every day if you want to and not burn out and not injure yourself. It’s a big differentiator from one of our competitors out there.
It’s a little bit like CrossFit 2.0, wrapped into a boutique fitness model with a lot of technology and the exponential playbook behind it to help it scale. You see, there are two studios open in the US. US is largely open, but I would imagine knowing expo that you’ve probably already had some activity on the new license front. You’ve been doing this for a few months. Is that what you said?
Yeah, mid-February 2022. In traditional Xponential fashion, we’ve awarded over 50 territories already. In general, the US market is still pretty wide open.
Fifty is nothing for you guys. Are you seeing some Xpo franchisees of other brands moving into BFT?
It’s been a good mix. Early on, we were able to announce to our franchise partners before we announced to the world, “We purchased BFT. This is going to be an opportunity for you.” We had some existing franchise partners, our other brands, raise their hands and say, “I’m interested.” They come on and purchase BFT. That’s nice for us. That’s an opportunity for our existing franchise partners to buy any existing brand and expand their footprint in the same area or territory if it’s available.
We’ve had two partners as well. This is the cool part. We always come back to like, “What’s your passion? What drives you day in, day out?” One of the common themes that every single one of our new franchise partners has in common with BFT is that they’ve come through the process and our confirmation day. The common theme is, “Lou, this is how I work out. I love working out this way. I can’t wait to bring this into my community. This is what I love and I’m passionate about.” We’re off to a good start. With our early franchise partners, there is that passion there. They also see the business opportunity of growing and scaling.
This is the beauty of franchising. We’ll have some people that come in and buy a single location here or there. On average, at Xponential, our franchise partners are buying a three-pack, as we call it, which are three territories. We give a discount on the franchise fees for three or more, but then we add an existing Club Pilates franchise partner come in and buy out all of Nashville. Nashville is sold out for BFT. Sorry for anyone that was interested.
The good news is we’ll have some BFTs open soon in Nashville. Those are the opportunities that are out there. When you talk about scaling, everyone is on their own path as well. You may be considering one location, like, “That’s all I can handle,” but that may change in 1, 2 or 3 years from now and then someone like Steve Hitzemann came in. Steve came in and bought three territories to start out and started down the path of signing one lease and then a second lease, and then bought three more territories, realizing like, “This could be big. I want to own all of my territories.”
Now that he’s got four open and he sees what he can do and how he has scaled, now he’s thinking about going even bigger than that. The story I love is that franchising can give anyone that the story, whatever your personal story you want, is there. It always comes back to trying to find something that you’re passionate about. Franchising is a great vehicle to give people the opportunity to scale something that they’re passionate about.
Getting hooked up with the right franchise company, not just the widget. Every single layer and all the pieces of the puzzle. Xponential does an amazing job of setting the benchmark high that not every franchise company will be able to attain, but also bringing people on like you that have had success and continue to have success, taking and leading brands nationally. I appreciate you joining. Thank you for sharing and dropping some great wisdom on here. I know that there’s a lot to absorb from a lot of different angles from everything that you shared. Thank you. I appreciate it.
Thanks for having me on. I love talking about this. I love talking about the business side. I appreciate it. I always love spending time with you.
I’ll see you at the next conference.
About Lou DeFrancisco
Dynamic, results-oriented service-industry executive with B-to-B and B-to-C experience in the IT, health, fitness, wellness and franchising industries.
Strong operational leader, excelling at creating and implementing effective marketing, sales, and operational systems, with a focus on brand, growth and profitability.
Excellent listener and communicator, with ability to build strong relationships with employees, business partners, clients, and vendors.
My Strengths (according to StrengthsFinder 2.0):