F45 to IPO: How a Sydney Fitness Studio Grew into an International Franchise

Last week, Aussie-born fitness franchise F45 announced it was merging with US business Cresent Acquisition Corporation, in a move that would allow it to be publicly traded on the NASDAQ.

Through the deal, F45 will be acquired by Crescent, a so-called ‘blank cheque’ company that exists for this very purpose, meaning the fitness brand will be able to trade on the New York-based stock exchange.

The combined publicly traded company will retain the F45 name after the transaction is complete, expected to be in Q3 2020.

Founded in Sydney back in 2012, F45 has grown over eight years to have some 1,900 franchisees in at least 50 countries.

In a statement, F45 co-founder and newly crowned chief Adam Gilchrist said the merger will allow the fitness chain to grow further, and achieve its mission on a global scale.

“The company was founded to make unique, effective and high-quality training accessible to everyone, while empowering franchisees to run successful businesses,” Gilchrist said.

“As a public company, I am confident that we will be able to accelerate our mission while creating value for our shareholders.”

In the midst of a global pandemic, with gyms all over the world closing for health and hygiene reasons, this may not seem like the ideal time to push for growth.

It also follows something of a tumultuous road for the Aussie-born business, which ultimately saw its founding chief step away.

So, how did F45 go from Aussie fitness upstart to global health player, and now to publicly-traded corporation?

Early days

F45 was founded in 2012 by then chief executive Rob Deutsch, who opened their first studio in Paddington, Sydney.

Deutsch set out to provide high-intensity, functional and fun workouts in 45-minute boosts, and swiftly perfected the studio’s workout model — ‘F’ for functional, in 45 minutes.

Tech plays a big role in the workout, and explains the scalability of the thing. Customers are guided through workouts by a set of digital displays, while heart monitors are used to track their heart rates and calories burned, and to keep track of individual progress.

Hardcore members can also sign up for the F45 Challege app, which offers access to nutritionists, meal plans and food tracking.

Swift growth

To say the franchise grew quickly would be an understatement. Within two years, F45 had sold some 500 franchises.

By 2017, there were 750 studios around the world, reportedly each bringing in $400,000 in turnover each year.

Fast forward to 2019, and the business had more than 1,500 studios in 40 countries. In March of the same year, American actor Mark Wahlberg invested in the business, leading a round that reportedly valued it at US$450 million ($634 million).

A FastCompany article last year said the franchise had signed up 84 studios in a single month. At the time, Deutsch told the US publication he had dreams of growing to between 5,000 and 7,000 studios in the US.

Rocky recent history

Early this year, Bloomberg reported F45 had confidentially filed for IPO in the US, suggesting the listing could come in the first half of 2020.

But, come June, the listing appeared to be on ice, with Australia’s Sydney Morning Herald reporting it hadn’t filed a single document yet.

At the same time, in late 2019 F45 brought legal proceedings against competitor gym franchise Body Fit Training, founded in 2017 by former AFL coach Cameron Faloon.

F45 claimed Body Fit had infringed its patent relating to “remote configuration and operation of fitness studios from a central server”.

The former said it had lost income as a result, as prospective F45 franchisees were being snapped up by Body Fit instead.

The next hearing is reportedly set for November this year.

But, before the legal stoush could be wrapped up, co-founder Deutsch announced he would be stepping down from the business.

Back in April, the founder announced in an Instagram post that he had “transitioned out” of his role as chief executive, but remained a shareholder in the business.

“As the founder of F45, I’ve had the privilege of helping build the company into one of the fastest-growing fitness franchises in the world,” he said in the post.

Of course, at the same time, F45 studios all over the world were forced to close their doors due to the COVID-19 pandemic. But, Deutsch said the future for F45 “is bright”.

“I look forward to watching from afar.,” he said.

“I look to the future with optimism and wish all friends, family, and franchisees a safe journey through this challenging time.”

He also hinted that he was working on a new projects, saying he has “a sneaking suspicion we will meet again soon in the wellness space”.

According to the Sydney Morning Herald, Deutsch has recently been named as a director for two businesses: R2 Capital and Youngr.

Final countdown

Now, it appears F45 is using a different tactic to take its Aussie-grown venture public.

The business will be acquired by Crescent Acquisition Corp, allowing it to trade publicly, raising funds to fuel further expansion.

It will trade under the F45 name, and will continue to be led by Gilchrist and chief financial officer Chris Payne and chief operating officer Heather Christie.

The combined company is expected to have a total enterprise value of $845 million, and current F45 shareholders are expected to retain 60% of shares at the closing of the deal.

In a joint statement, Crescent Acquisition Corp chief Todd Purdy and executive chair Robert Beyer called F45 “undoubtedly one of the most exciting growth stories in health and fitness”.

“F45’s high profit margins, exceptional franchisee economics and repeatable business model position it for continued rapid expansion,” they said.