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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Row House’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year, by the franchised Row House Studios that were open for at least 12 calendar months (“Disclosed Studios”)

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year, by the Disclosed Studios that were actively providing the Approved Services within their respective Studios (the “Disclosed Studios with Active In-Studio Operations”)

• average monthly gross sales generated in each calendar month comprising the 2020 calendar year, by the remaining Disclosed Studios that were forced to cease in-Studio operations for 1 or more days within the applicable calendar month (the “Disclosed Studios with Interrupted In-Studio Operations”)

Section I – Background Information

16 Things You Need to Know About the Row House Franchise

Ranked on Entrepreneur’s Lists Along with Other Xponential Fitness Brands

1.  In mid-April 2021, Xponential Fitness, parent company of Row House and other boutique fitness brands, announced that four of its brands have ranked on Entrepreneur magazine’s annual Top New Franchises list, including Row House at No. 37, AKT at No.77, StretchLab at No. 49, and YogaSix at No. 42.

2.  Earlier in the month, Row House, StretchLab, and YogaSix also appeared in Entrepreneur magazine’s Fastest-Growing Franchises list, as well as three other Xponential brands. The brands recognized were Row House at No. 51, Club Pilates at No. 66, CycleBar at No. 78, Pure Barre at No. 76, StretchLab at No. 59, and YogaSix at No. 80.

3.  Sarah Luna, president of Xponential Fitness, said, “It is an honor to have a significant presence on Entrepreneur’s lists, exemplifying our brands’ hard work to stay strong during the COVID-19 pandemic. Our owners and members understand the positive impact of boutique fitness on our communities, and it’s incredible to see not just one of our brands ranked, but the majority of them.”

4.  Entrepreneur magazine’s annual Top New Franchises list ranks brands that have been franchising for five years or less. The ranking is based on each franchise’s score received in Entrepreneur’s Franchise 500 list that includes analysis on the areas of costs and fees, size and growth, franchisee support, brand strength, and financial strength and stability. The highly sought-after list positions franchise brands across the U.S. to help future franchisees make a promising investment.

5.  During the pandemic, Xponential was given the opportunity to show its brands’ perseverance and innovation in the fitness industry. With a powerful leadership team, brands quickly pivoted to offer outdoor and virtual workouts and events, with some studios even renting out equipment to continuously engage their members in boutique fitness.

6.  The company’s strategies have proven effective as franchisees recovered to approximately 84% of actively paying members relative to January 31, 2020 membership levels. With almost all studios reopened as restrictions continue to ease, the company continues to support studios as they ramp up operations and serve their members.

Parent Company Appoints New President

7.  In mid-January 2021, Xponential Fitness – the largest curator of premium boutique fitness brands including Row House, Pure Barre, Club Pilates, CycleBar, YogaSix, StretchLab, AKT, and STRIDE – announced that it has appointed Sarah Luna, president of Pure Barre at the time, to a new executive role as president of Xponential Fitness.

8.  In this new position, Luna will drive efficiencies across all eight brands and Xponential departments, lead projects and partnerships for the parent company, and manage efforts with the executive team to achieve their aggressive growth plans. Stepping into Luna’s role as president of Pure Barre will be Regan Stokes, the brand’s then senior vice president of operations.

9.  At just 34 years old, Luna will be one of the youngest women to serve as the top executive of a global fitness company. Throughout her career, she has gained experience in nearly every corner of the health and fitness industry, starting out as a professional dancer and Pilates instructor then moving into business ownership as a Jazzercise franchisee.

10.  Luna pursued her MBA at Chapman University to better understand the business side of the fitness world and soon after, was hired at Equinox to run their Pilates department in Los Angeles and Orange County clubs. While teaching a Pilates class, she met Anthony Geisler, the founder and CEO of Xponential Fitness.

11.  Geisler brought Luna on board in 2015 as national sales director and eventually SVP of operations for Club Pilates, where she opened hundreds of studios and developed and led the sales process that all Xponential brands use to this day. Upon Xponential’s acquisition of Pure Barre in 2018, Luna was promoted to president of that brand, where she excelled in leading a nationwide studio refresh and conversion to ClubReady’s operating system. She also unified and streamlined studio operations for increased performance across all locations, which now total over 570 around the world.

12.  According to Geisler, “We could not be more pleased to welcome Sarah Luna to the Xponential Fitness executive team. Over the past five years, she has worked tirelessly to make sure Club Pilates and Pure Barre excel in the boutique fitness space. The 1,100+ successful studios that exist today between both of those brands is a byproduct of her excellent leadership skills and savvy strategy. She will be an invaluable asset in driving all of our brands to the same level of success over the next decade.”

13.  Luna said, “It is an honor to take on this new role of President at Xponential Fitness. Above all else, I want our franchisees to succeed and represent the best of the best in the boutique fitness industry. Despite the challenges brought about by the pandemic, our owners have exemplified creativity and resilience over the past year, and I’m excited to work more closely with them and bring out even more of these positive qualities as we tackle new, loftier goals and initiatives across all our brands in 2021.”

Company History

14.  Row House was founded in 2014 by husband and wife Eric Frohlich and Debra Strougo, in the Columbus Circle neighborhood of New York City. The couple had already been running a gym and two CrossFit Studios. However, Frohlich and Strougo were looking for a workout that two individuals with different fitness levels could do together. They decided to focus on the rowing machine, which was often a neglected piece of gym equipment. Frohlich and Strougo developed a fitness program that gives people of all different shapes, sizes, and abilities an efficient and effective workout.

15.  The first Row House was a success and Frohlich and Strougo opened additional locations around Manhattan and Brooklyn. In 2018, Row House was acquired by Xponential Fitness, a curator of leading boutique fitness brands across multiple verticals. Following the acquisition, Row House began franchising. Also, as part of the deal, Frohlich and Struogo still own and operate the original Row House locations. Today, there are Row House locations around the United States and Canada.

Entrepreneur’s Franchise 500

16.  Row House did not rank on Entrepreneur’s 2021 Franchise 500 list. However, Row House did rank No. 37 on Entrepreneur’s 2021 Top New Franchises list as well as No. 51 on its 2021 Fastest-Growing Franchises list.

Section II – Estimated Costs

• Detailed estimates of Row House franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• 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 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

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

2020

• Outlets at the Start of the Year:  54
• Outlets at the End of the Year:  70
• Net Change:  +16

Company-Owned

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

2020

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  16
• Net Change:  +16

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• In the initial chart presented in this Item 19, Row House discloses the average monthly Gross Sales generated over each calendar month comprising the 2020 calendar year (each, a “Calendar Month”).

• The applicable subset of franchised Studios disclosed for each Calendar Month in all Parts of this Item 19 will be those Studios that were: (i) owned and operated by a System franchisee throughout the Measurement Period; and (ii) had their soft opening and at least 11 months of operation beyond that soft opening data as of the end of that Calendar Month (each, an “Applicable Subset”).

• For purposes of this Item 19, the Studios comprising the Applicable Subsets will be, at times, referred to generally as the Disclosed Studios.

• In addition to disclosing the monthly Gross Sales information amongst the Applicable Subset of all Disclosed Studios for each Calendar Month, this Item discloses the same Gross Sales information for each Calendar Month amongst:

• (i) the Applicable Subset of Disclosed Studios that actively provided the Approved Services via in-Studio operations throughout the Calendar Month at issue without interruption (the “Studios with Active In-Studio Operations”); and

• (ii) the remaining Disclosed Studios in that same Calendar Month’s Applicable Subset that were forced to cease or suspend in-Studio operations for one or more days during that Calendar Month (the “Studios with Interrupted In-Studio Operations”).

• The below charts in Item 19 only exclude: (i) Row House’s affiliate-owned Studio(s); and (ii) with regards to a given Calendar Month comprising the 2020 calendar year, any franchised Studio that was not open for 12 or more calendar months as of the start of that Calendar Month.

• Row House also excluded one franchised Studio owned and operated by Row House’s founder pursuant to a franchise agreement because it is operated from a shared premises as part of an “add on” to an existing cross-fit business and, as such, is not operated in a substantially similar manner to the Franchised Business offered under the Disclosure Document.

• The financial performance representations contained in this Item 19 are historical representations based on past performance of the Disclosed Studios. The following representations are based on monthly profit and loss reports provided by the owners of the Disclosed Studios.

• The Disclosed Studios earned these amounts. Your individual results may differ. There is no assurance that you’ll sell as much.

Part 1 – Average Monthly Gross Sales Generated Amongst the Applicable Subset of Disclosed Studios for Each Calendar Month Comprising the 2020 Calendar Year

• January 2020 (6 studios):  $34,020
• February 2020 (7 studios):  $33,156
• March 2020 (8 studios):  $19,766
• April 2020 (10 studios):  $9,194
• May 2020 (11 studios):  $8,079
• June 2020 (11 studios):  $13,669
• July 2020 (14 studios):  $14,054
• August 2020 (23 studios):  $14,004
• September 2020 (27 studios):  $14,881
• October 2020 (33 studios):  $14,206
• November 2020 (40 studios):  $14,079
• December 2020 (42 studios):  $13,589
• Total 2020:  $202,697

Part 2 – Average Monthly Gross Sales Generated Amongst the Applicable Subset of Disclosed Studios with Active In-Studio Operations for Each Calendar Month Comprising the 2020 Calendar Year

• January 2020 (6 studios):  $34,020
• February 2020 (7 studios):  $33,156
• March 2020 (N/A):  N/A
• April 2020 (N/A):  N/A
• May 2020 (3 studios):  $14,700
• June 2020 (9 studios):  $14,979
• July 2020 (9 studios):  $16,133
• August 2020 (13 studios):  $16,447
• September 2020 (20 studios):  $15,693
• October 2020 (27 studios):  $14,638
• November 2020 (29 studios):  $15,759
• December 2020 (30 studios):  $15,377
• Total 2020:  $190,902

Part 3 – Average Monthly Gross Sales Generated Amongst the Applicable Subset of Disclosed Studios with Interrupted In-Studio Operations for Each Calendar Month Comprising the 2020 Calendar Year

• January 2020 (N/A):  N/A
• February 2020 (N/A):  N/A
• March 2020 (8 studios):  $19,766
• April 2020 (10 studios):  $9,194
• May 2020 (8 studios):  $5,597
• June 2020 (2 studios):  $7,771
• July 2020 (5 studios):  $10,311
• August 2020 (10 studios):  $10,829
• September 2020 (7 studios):  $12,559
• October 2020 (6 studios):  $12,263
• November 2020 (11 studios):  $9,649
• December 2020 (12 studios):  $9,118
• Total 2020:  $107,057

• The term “Gross Revenue” means the total revenue generated by the Disclosed Studios over the Measurement Period, including all revenue generated from the sale and provision of any and all Approved Services at, from, or otherwise through, that Studio.

• It does not include (a) sales tax that is collected by a Disclosed Studio for payment to the appropriate taxing authority, or (b) any tips that Studio personnel receive from Studio clientele and not remitted to the Studio directly.

• When reviewing this Item 19 and evaluating the franchise offering generally, it is very important to note the following characteristics of Disclosed Studios described in this Item 19 (as compared to a new Franchised Business):

• a. The territory wherein a number of the Disclosed Studios operates is located within the State of New York, where the Row House brand has likely obtained more of a reputation and garnered goodwill amongst the relevant target audience (as compared to another region of the United States where there are no System Studios or only a few new Studio locations);

• b. The Disclosed Studios did not incur certain pre-opening costs and expenses over the Measurement Period that you are likely to incur in connection with the development of a new Franchised Business – this is because these Studios were open and operating for some time as of the date the Measurement Period commenced;

• c. Please note that some of the Disclosed Studios are larger than 2,000 square feet, but each Disclosed Studio has around the same number of rowing ergometers that Row House requires you to have for your Franchised Business. You will recall that Row House’s standard franchise offering expects that your Franchised Business will be approximately 2,000 square feet in size.

• d. Certain aspects of one or more of the Disclosed Studios are primarily managed on a day-to-day basis by a single individual that is engaged by the Disclosed Studio to manage such matters. While this engagement would be similar to you engaging a “Designated Manager” or other third party to assist in managing certain aspects of your Franchised Business, Row House does not expect that you will be engaging such a third party at the outset of operating your new Franchised Business (unless you are a multi-unit owner).

• This Item 19 does not contain any information regarding the initial or ongoing operating costs and expenses associated with establishing and/or operating a Franchised Business.

• The revenues and expenses of your business will be directly affected by many factors, such as:

• (a) your Designated Territory’s geographic location and population demographics;
• (b) advertising effectiveness based on market saturation;
• (c) whether you operate the business personally or hire a third party to serve as your Designated Manager;
• (d) your product and service pricing;
• (e) vendor prices on materials, supplies, and inventory;
• (f) personnel salaries and benefits (life and health insurance, etc.);
• (g) insurance costs;
• (h) weather conditions;
• (i) ability to generate customers;
• (j) customer loyalty;
• (k) employment conditions in the market; and
• (l) the efforts you and your personnel put into your Franchised Business.

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