key point
- Xponential Fitness is working to wipe the slate clean and leave accusations of misselling behind it.
- Payments have been agreed with no admission of liability.
- The company reported net losses of US$53.7 million in 2025 and adjusted EBITDA down 4 per cent to US$111.8 million.
- The downgraded outlook saw share prices fall by 47 per cent
Xponential Fitness says it has settled two major cases out of court as it seeks to wipe the slate clean, following several years facing litigation from multiple US agencies.
Xponential Fitness pays $17 million to settle with FTC
The first, with the United States Federal Trade Commission, will see Xponential paying a US$17 million civil penalty and compliance settlement over a 12 month period.
The negotiated settlement did not involve any admissions of liabilty by Xponential, which had been accused of misleading franchisees in relation to financial projections, studio profitability and the financial health of certain brands.
The threat of legal action will be removed as soon as the agreement has been signed by FTC Commissioners and the federal court has entered the consent order – thought to be technicalities.
As part of the agreement, Xponential has undertaken to change its working practices and the agreement will see the company following clear rules when making franchise earnings claims, limiting sales practices used to recruit franchisees and adopting enhanced disclosure and compliance monitoring processes.
Xponential Fitness needs to pay $22.75 million in settlement funds to more than 500 current and former franchisees
Xponential has also finalised a US$22.75 million civil litigation suit with over 500 current and former franchisees who allege misselling, with this settlement to be paid over a thirty-five month period, indicating a value of US$45,000 per complainant.
The Company believes these resolutions and payments, totalling US$39.75 million, will substantially reduce regulatory and legal uncertainty.
Xponential had previously also been subject to a possible investigation by the US Attorney’s Office for the Central District of California, however, it is not currently clear whether that matter has been closed quietly or is ongoing.
US prosecutors sometimes defer to civil regulators, so a settlement with the Federal Trade Commission could have effectively closed parallel inquiries. HCM will report once matters are clearer.
Along with its statements about the Federal Trade Commission, Xponential also released its most recent results, with CEO, Mike Nuzzo, saying 2025 was a “year of progress”.
Xponential’s 2025 financial performance: net loss of $53.7 million, stock price down 47%
For the full year 2025, total revenue decreased by 2 per cent, to US$314.9 million. The net loss was US$53.7 million and adjusted EBITDA was down 4 per cent to US$111.8 million.
Share prices dropped 47 per cent on the news.
“The fourth quarter capped a year of progress as we refined the strategic priorities that will drive Xponential’s long-term growth,” said Nuzzo.
“As we enter 2026, we’re focused on driving organic growth and elevating the member experience. We’re making intentional investments to drive member acquisition and retention, even if this results in more modest near-term adjusted EBITDA.”
There were 179 franchise licenses sold and 341 new studios opened in 2025.
The 2026 outlook is for 150 to 170 new studio openings, a decrease of 20 per cent at the midpoint and revenue in the range of US$260.0 million to US$270.0 million, representing a decrease of 16 per cent at the midpoint.
Xponential has adjusted its pipeline reporting since 2022-23, when it said it had 3,000 studios sold but not open. This fell to around 1,590 in 2025, with the difference not being reflected in the opening numbers, indicating that a significant number have been terminated, expired or been cancelled.
The 2025 year-end report said 30 per cent of pipeline projects are over 12 months behind schedule and classified as inactive.
Xponential also reported that it has US$525 million in total long-term debt.
In terms of brand performance, Club Pilates is the standout, accouting for 65 per cent of total system-wide sales and driving 78 per cent of annual license sales in 2025.
BFT posted a 3 per cent average unit volume increase, YogaSix 12 per cent increase and StretchLab – which is getting an overhaul – declined by 12 per cent.
Franchise Revenues were up 14 per cent year on year, mainly due to higher franchise territory revenue from “accelerated license resolution.”
Merchandise Revenue was up 18 per cent year on year, with the company citing favorable retail sales and benefits from outsourcing its retail operations.
Xponential 2026 business contraction, growth slowdown
Xponential has divested a number of its brands recently, reducing its capacity to sell, but focusing more on its hero brands, going from 11 brands in 2023 to 5 in 2026.
The current portfolio includes Club Pilates, Pure Barre, YogaSix, StretchLab and BFT (Body Fit Training).
Gone from the porfolio are Row House and Stride, which were sold in 2024 and CycleBar, Rumble and Lindora, which were sold in 2025.
The AKT studios (Anna Kaiser Technique) were slated to be rebranded as Kinergy, but closed following the termination of Xpotential’s deal with Julianne Hough. Anna Kaiser Technique is now an app.
Background
An additional investigation into Xpotential Fitness by the US Securities and Exchange Commission closed in 2025, with no enforcement action being taken.
The investigation started on 11 December 2023 and was looking into potential securities fraud and accounting issues. It followed a short-seller report from Fuzzy Panda Research in June 2023 which accused the company of inflating performance, overextending franchisees and relying on questionable practices.
On 1 July 2025 the SEC informed the boutique franchisor that it has concluded its investigation without action.
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Infomation Source: HCM
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