Xponential Fitness Under Federal Investigation Amid Fraud Allegations

Xponential Fitness, the largest fitness company in the US, is facing multiple federal investigations into possible fraud, with its CEO Anthony Geisler suspended indefinitely amid allegations of threatening a franchise owner. The company is accused of misleading franchisees, trapping them with long-term leases and personal guarantees, and misrepresenting financial performance, with hundreds of franchisees seeking legal counsel to exit their deals." This description focuses on the primary topic of the article (Xponential Fitness facing federal investigations into possible fraud), the main entities involved (Xponential Fitness, Anthony Geisler, and franchise owners), the context (the fitness industry), and the significant actions and consequences (suspension of CEO, allegations of fraud, and franchisees seeking legal counsel). The description also provides objective and relevant details that will help an AI generate an accurate visual representation of the article's content, such as the company's logo, a fitness studio, or a graph showing financial performance.

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Xponential Fitness Under Federal Investigation Amid Fraud Allegations

Xponential Fitness Under Federal Investigation Amid Fraud Allegations

Xponential Fitness, the largest fitness company in the US with over 3,000 boutique studios under brands like PureBarre, Rumble, and CycleBar, is facing multiple federal investigations into possible fraud. The company's CEO, Anthony Geisler, has been suspended indefinitely amid allegations that he threatened to decapitate a franchise owner during a mediation session.

Why this matters: The allegations of fraud and mismanagement at Xponential Fitness have far-reaching implications for the entire fitness industry, as well as the thousands of franchise owners and employees who depend on the company's success. If the investigations uncover widespread wrongdoing, it could lead to a significant overhaul of the company's business practices and potentially even affect the broader franchising industry.

The US Attorney's Office for the Central District of California and the Securities and Exchange Commission (SEC) are investigating Xponential Fitness. The New York State Attorney General's office and the Washington State Attorney General's office have also interviewed franchisees and others with knowledge of the company's business practices.

Xponential Fitness allegedly misled franchisees into agreements and trapped them with 10-year leases and personal guarantees. Franchisees were stuck with equipment leases that caused some to file for bankruptcy. The buildouts of studios took substantially longer than promised. According to franchise documents, "8 out of every 10 Xponential brands are losing money monthly, with over half of Xponential studios never making a positive financial return." The company allegedly misrepresented the number of failed studios to investors.

Hundreds of franchisees have sought legal counsel to get out of their deals. Franchisees are "terrified" to speak out against Geisler, fearing retaliation. Mediation is set to begin on May 29, and if a resolution is not reached, a lawsuit may be filed.

In response to the allegations, Xponential Fitness has named board member Brenda Morris as interim CEO. The company did not immediately respond to requests for comment. Geisler denied making the threatening comment and did not return calls for comment.

The Law Offices of Howard G. Smith has launched an investigation into potential claims against Xponential Fitness' board of directors for breaching their fiduciary duties to shareholders amid the federal investigations. The investigation is focused on shareholders who purchased shares before 2022.

The federal investigations and allegations of fraud at Xponential Fitness paint a troubling picture for the nation's largest fitness franchisor. With the CEO suspended and hundreds of struggling franchisees seeking to exit their agreements, the company faces an uncertain future as it works to address these serious issues. The outcome of the upcoming mediation and potential lawsuits could have major implications for Xponential Fitness and its thousands of studios across the country.

Key Takeaways

  • Xponential Fitness faces multiple federal investigations into possible fraud.
  • CEO Anthony Geisler suspended amid allegations of threatening franchise owner.
  • Franchisees claim company misled them into agreements with 10-year leases and personal guarantees.
  • Hundreds of franchisees seek legal counsel to exit deals, citing financial struggles.
  • Interim CEO named, federal investigations and lawsuits may lead to significant changes.