FDD Talk 2020: Row House Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Row House franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Row House franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Row House franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Row House outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Row House’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 gross revenue generated by the only franchised Row House studio open and operating as of December 31, 2019 that was (a) owned and operated by the same ownership group throughout the entirety of the Measurement Period, and (b) operated from a standalone/dedicated space utilizing Row House’s Marks and System

Section I – Background Information

15 Things You Need to Know About the Row House Franchise

Surpasses 300 Signed Franchise Agreements

1.  At the end of July 2020, Row House announced that it had surpassed 300 signed franchise agreements. With close to 75 studios already open (at the time of the announcement), this new accomplishment falls in line with the brand’s overarching goal to have over 300 locations by 2022. Recently signed agreements will bring at least one new location to cities such as Omaha, North Haledon, and Denver, and three new locations to Phoenix, Jacksonville, and Los Angeles.

2.  Notably, several studios are being developed by entrepreneurs who already own franchises within the Xponential Fitness portfolio. Row House in North Haledon is being developed by an existing CycleBar owner, and the three Los Angeles locations will be opened by a Club Pilates owner.

3.  Ramon Castillon, president of Row House, said, “Community and inclusivity are cornerstones of the Row House brand, and people are craving both now more than ever, due to challenges 2020 has thrown their way. What was once a niche concept is becoming very mainstream, as Row House has been widely adopted by friends, family members and colleagues thanks to the inclusive nature of our programming and culture. We believe this is what is drawing so many incredible entrepreneurs to the concept and could not be more excited to help them bring our transformative workout to their communities and change lives.”

4.  To continue its rapid expansion, Row House is actively seeking qualified franchise partners. Headquartered in Irvine, CA, Row House is backed by Xponential Fitness, a curator of leading boutique fitness brands. The Row House franchise opportunity offers potential franchisees the opportunity to capitalize on an emerging fitness market across all 50 states. With a total investment of $276,600 to $499,500, Row House provides a wealth of support, infrastructure, and knowledge from the Xponential Fitness team.

Raises Donations for Feeding America COVID-19 Fund

5.  In late April 2020, Row House announced that it is supporting Feeding America to give back during these uncertain times. About one in seven people in America rely on food banks, and amid the COVID-19 pandemic that has many people “stockpiling,” food charities have faced challenges as the demand for food in the marketplace has increased exponentially. With this in mind, the nation’s leading boutique fitness rowing concept has found a way to help combat the challenges these food banks are facing.

6.  On May 2, Row House invited fans across the nation to grab their rowers and join a virtual rowing session to help feed America. The 60-minute rowing workout was intended to raise donations for Feeding America, a charity that aims to feed the hungry through a nationwide network of member food banks, and engage the country in the fight to end hunger. Attendees could sign up on the brand’s website for Row House’s virtual 60-minute row to help feed America.

7.  Rowers raised donations in a few ways:

• Pledging their donation of one penny for every meter rowed;
• Have someone sponsor them for every meter rowed;
• Share with their social following to raise awareness about Feeding America and how they can participate.

8.  During this time, Feeding America’s network of food banks has resorted to working more closely with manufactures and distributors to source food due to consumers stockpiling products, and ultimately has seen a decrease in rescued food – what it typically relies on. This has resulted in a 22 percent increase in operating expenses, forcing food banks to dip into their reserve to purchase food to provide to those in need. Feeding America feeds about 40 million people at risk of hunger, including 12 million children and seven million seniors.

9.  Ramon Castillon, president of Row House, said, “With food banks under more pressure than ever, we at Row House are committed to helping raise donations for Feeding America’s fund to help families across the nation who are at risk of hunger. Our 60-minute virtual row is a great way to spread Feeding America’s charity initiative as well as getting our members involved to pull together and support communities.”

Lands on 2020 Inc. 5000 List

10.  In late August 2020, Inc. magazine revealed that Xponential Fitness, a curator of leading boutique fitness brands, has four brands ranked on its annual Inc. 5000 list, the most prestigious ranking of the nation’s fastest-growing private companies. The brands ranked include Row House at No. 1158, StretchLab at No. 363, Club Pilates at No. 1050, and CycleBar at No. 2166.

11.  The list represents a unique look at the most successful companies within the American economy’s most dynamic segment – its independent small businesses. Intuit, Zappos, Under Armour, Microsoft, Patagonia, and many other well-known names gained their first national exposure as honorees on the Inc. 5000.

12.  According to Anthony Geisler, CEO of Xponential Fitness, “Over the last three years, the brands under the Xponential Fitness umbrella have experienced incredible growth and we are honored to have three of our brands to be ranked amongst some of the most respected companies in the nation. With nearly 1,000 open between Club Pilates, StretchLab, Row House and CycleBar and hundreds in development, we are thrilled to see our brands continue to prosper and grow despite everything going on in the world right now.”

Company History

13.  Row House was founded in 2014 by husband and wife Eric Frohlich and Debra Strougo, in the Columbus Circle neighborhood of New York City. Born of the couple’s search for a workout that two individuals with varying fitness levels could do together, Frohlich and Strougo created a workout that gives people of all different shapes, sizes, and abilities an efficient and effective workout.

14.  Following the success of the first Row House studio, Frohlich and Strougo opened additional locations around Manhattan and Brooklyn. In 2018, Row House was acquired by Xponential Fitness, the holding entity that curates the best brands in every vertical of the boutique fitness space. Xponential Fitness immediately started franchising Row House and there are now locations across the U.S. and Canada.

Entrepreneur’s Franchise 500

15.  Row House did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Row House franchise costs, based on Item 7 of the company’s 2020 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Row House’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2019

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  54
• Net Change:  +54

Company-Owned

2017

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  2
• Net Change:  0

2018

• Outlets at the Start of the Year:  2
• Outlets at the End of the Year:  3
• Net Change:  +1

2019

• Outlets at the Start of the Year:  3
• Outlets at the End of the Year:  0
• Net Change:  -3

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• In this Item 19, Row House discloses the historical “Gross Sales” generated from January 1, 2019 through December 31, 2019 (the “Measurement Period”), as well as certain operating costs and expenses incurred over that time period, by the only franchised Studio open and operating as of December 31, 2019 that was:

• (a) owned and operated by the same ownership group throughout the entirety of the Measurement Period, and

• (b) operated from a standalone/dedicated space utilizing Row House’s Marks and System (the “Disclosed Studio”).

• The Disclosed Studio is owned by Row House’s brand founders that entered into a Franchise Agreement with Row House in 2019 to operate as a Franchised Business moving forward.

• Row House excluded the other franchised Studios that were open and operating as of December 31, 2019 on the following grounds:

• (i) the other franchised Studio owned and operated by Row House’s founders pursuant to a franchise agreement because it is operated from a shared premises as part of an “add on” to an existing CrossFit business and, as such, is not operated in a substantially similar manner to the Franchised Business offered under the Disclosure Document;

• (ii) one Studio was formerly an affiliate-owned Studio that was sold to a System franchisee in 2019 and, as part of that transaction, experienced a substantive disruption in business operations; and

• (iii) the 51 new franchised Studios that opened during the 2019 calendar year because these Studios were not open for the entire Measurement Period.

• The Item 19 disclosures are based on reports provided to Row House by the Disclosed Studio.