FDD Talk: AKT (Anna Kaiser Technique) 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 AKT franchise opportunity, including relevant news updates

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

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

• Section IV – Number of franchised and company-owned AKT 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 AKT’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average, median, highest, and lowest gross revenue for the only two Studios that were open and operated over the entire 2019 calendar year utilizing AKT’s Proprietary Marks and System (the “Disclosed Studios”)

Section I – Background Information

15 Things You Need to Know About the AKT Franchise

Signs 100th Franchise Agreement

1.  In mid-August 2020, AKT announced that it had surpassed 100 signed franchise agreements. Over the last few months before the announcement, despite the pandemic, AKT inked multiple deals and opened seven new locations in a variety of markets across the country. With over 15 studios open at the time, the recently secured deals will bring new studios to the likes of Fort Lauderdale, Miami, Northern Virginia and Los Angeles, more than quadrupling the brand’s current footprint. Headquartered in Irvine, California, AKT is backed by Xponential Fitness, a curator of eight leading boutique fitness brands.

2.  Melissa Chordock, president of AKT, said, “We believe AKT has maintained steady growth during the economic challenges the pandemic has presented because for so many people, fitness is more than just an hour of their day – it’s a lifestyle. With our programming tailored to all fitness levels, a robust on-demand presence to complement in-studio workouts and topnotch cleaning and safety procedures in all of our locations, we are confident AKT will continue to be a place people go to grow stronger bodies and minds.”

Expands Denver Footprint

3.  In mid-May 2020, AKT announced that it was going to open its second Denver location in mid-June. The 2,000 square foot studio is housed at LOT Twenty-Eight, an adaptive reuse project at the intersection of 28th and Blake Street in the River North Art District (RiNo). The raw space build-out will foster a collaborative environment and a culture that combines the personalization of private training with the community and electric experience that a boutique studio offers.

4.  The first AKT location in Cherry Creek had been closed since mid-March, but planned to reopen on May 15 with a pared down schedule – only allowing four people in each class to maintain social distancing, while following all state and city guidelines from the CDC for every client’s health and safety. Even after their reopening, the virtual classes will remain an option for those who are enjoying workout sessions from home. The RiNo studio will temporarily be used for virtual classes so patrons can get a sneak peek of the space until doors open.

5.  Both studios are owned and operated by local entrepreneurs Shannon and Bruce Jaeger. “We’re not going to open the doors to our new studio in RiNo just because the state says we can. We want to be mindful during this time and we’re happy to be creating jobs and satisfy people’s craving for community right now,” said Shannon Jaeger. “It’s just going to be a process of easing back into reality. We look forward to the day when we can have full-capacity classes, but right now we want people to trust that we’re taking care of them by delivering the same energy and workout in the most delicate way possible.”

Founder Sues Xponential Fitness and Vice Versa

6.  At the beginning of November 2020, Franchise Times reported that the relationship between AKT’s founder Anna Kaiser and its current parent company, Xponential Fitness, had soured. According to a press release, hearings were set to begin on November 11 in lawsuits exchanged between the two parties.

7.  Kaiser sued Los Angeles-based Xponential Fitness on August 3, claiming the umbrella company of eight fitness brands is botching the franchise rollout of her concept. Her lawsuit claims only eight studios were open as of this fall despite predictions there would be more than 150 open in 2019. She also alleges she has not received all she was owed for the deal, which was $2.15 million in cash plus $850,000 over three equal payments, according to the lawsuit. According to Kaiser, “They left me no choice but to sue — it was clear they were not going to pay me what I was owed.”

9.  The lawsuit also claims that Xponential CEO Anthony Geisler disparages Kaiser on Zoom calls with franchisees and freezes her out of management decisions. Attorneys pressing the case on Kaiser’s behalf, led by former U.S. District Judge Sue L. Robinson of the firm Farnan Law, did not return a request for comment.

10.  Xponential, which owns eight fitness brands, then sued Kaiser days later, saying Kaiser has unleashed a “campaign of disruption” that is “willful, wanton, malicious and oppressive.” She opened two of her studios and rebranded them as Anna Kaiser Studios, which Xponential claims violates her non-compete agreement. Through an outside spokesman, Xponential declined to comment on the Franchise Times article.

11.  This is the first public dent in Xponential’s standard operating procedure since 2015, when Geisler started the company by buying Club Pilates from its founder, and spent several months revamping the concept to make it more attractive to franchisees. He envisions at least 10 brands, for the “X” in Xponential, each in its own vertical.

12.  Geisler said that founders often have an unrealistic view of the viability of their brands to franchise. After buying Club Pilates, Geisler said, “You have an excellent chef who loves to cook but who is a terrible restaurateur.” He and President Shaun Grove grew Club Pilates from 25 locations in March 2015, to finish 2019 with 562 locations. Xponential has also purchased CycleBar, StretchLab, Row House, Pure Barre, YogaSix and Stride, along with AKT.

Company History

13.  AKT (Anna Kaiser Technique) was founded in 2013 by celebrity fitness trainer Anna Kaiser in New York City. Kaiser developed her own fitness program based on a combination of HIIT, circuit training, dance cardio, yoga, Pilates, strength, and toning. Before starting AKT, Kaiser had numerous celebrity clients and used her reputation to build up AKT.

14.  After a few years and additional locations, Kaiser sold AKT to Xponential Fitness in 2018. Under the leadership of Xponential Fitness, AKT launched national franchising. However, AKT’s growth has been relatively slow, with just a handful of locations open in the United States.

Entrepreneur’s Franchise 500

15.  AKT did not rank on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of AKT 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 AKT’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:  3
• Net Change:  +3

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:  2
• Net Change:  0

2019

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

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

• In the chart below in this Item 19, AKT discloses the average “Gross Revenue” generated from the calendar year 2019 (the “Measurement Period”) by the only two Studios that were open and operated over that entire calendar year utilizing AKT’s Proprietary Marks and System (the “Disclosed Studios”).

• These two Disclosed Studios opened in November 2013 and November 2015, respectively, and both have operated continuously since opening.

• AKT excluded the four other Studios open and operating as of December 31, 2019 – one of which was affiliate-owned, with the other three owned and operated by franchisees – because those Studios did not open until some point in 2019 and, as such, were not open and operating over the entire Measurement Period.

• This Item 19 also excludes any disclosures related to the two pop-up “studios” that AKT’s founders operate from time-to-time on a temporary basis under the Proprietary Marks because these Studios are not operated in a substantially similar manner to the Franchised Business (in terms of hours of operation or Studio environment) and, as such, are not the kind of traditional Studio accounted for in the Disclosure Document.

• AKT and the owner of the Disclosed Studios have an agreement for the Disclosed Studios to be operated pursuant to a Franchise Agreement with AKT and, once AKT enters into such Franchise Agreement(s), the Disclosed Studios will be operated as franchised Studios moving forward.

• The financial performance representations contained in this Item 19 are historical representations based on past performance of Disclosed Studios. The following representations are based on monthly revenue reports provided by the owners of the Disclosed Studios. No other Studios of any kind were in existence during the Measurement Period.

• Some Studios have earned these amounts. Your individual results may differ. There is no assurance that you’ll earn as much.

Average Gross Revenue Amongst Disclosed Studios Over Measurement Period