F45 co-founder Rob Deutsch says “never in his wildest dreams” could he have imagined the sudden fall of the fitness empire that began in 2013.
The Australian gym behind what actor Mark Wahlberg calls the “best workout on the planet” took a major hit to its global ambitions this week after revealing it was laying off 110 employees.
It came as Adam Gilchrist, who shares the same name as the Australian cricketer and founded the business alongside Deutsch, suddenly announced he was stepping down as CEO and chairman of the company’s board.
F45 stated that it was massively curtailing its expansion plans “amid changing business and macroeconomic conditions.”
After planning to launch 1,500 new franchises this year, F45 will target between 350 and 450 and its projected revenue has been reduced from $275 million to $130 million.
The announcement had a catastrophic impact on the company’s shares, which plunged more than 60 percent on Wednesday (US time) to a low of 79 cents.
It had improved to $1.59 on Thursday afternoon, but was still miles away from when it was first listed on the New York Stock Exchange (NYSE) in July of last year at a price of $16.10 per share.
Deutsch, who stepped down as CEO of the company and sold his shares in 2020, was stunned by the events.
“Never in my wildest dreams could I have imagined this,” she wrote on Instagram. “When I went out and sold F45, I left behind a phenomenal, healthy business beast. From the company culture to the heart of the business… Training. F45 was special.
“I really hope that all 110 laid-off employees find happiness and opportunity elsewhere.”
Deutsch’s post received dozens of comments from F45 franchisees and devoted gym-goers, providing insight into what contributed to the company’s collapse.
The former Sydney banker stated there were “massive problems that needed fixing” when asked if F45 could turn around and seemed to agree with a Hawaiian F45 trainer who suggested the decision to take the company public was a mistake.
An F45 franchise account in Canada also seemed to claim that the company made decisions during the Covid lockdowns that were “crushing”.
“We wish you were still involved,” commented F45 Training Doon. “The decisions they made during the damaging lockdowns were crushing for the franchises. It’s amazing how the last 2 years have been, especially if you opened during the pandemic. Just absolute hell in Canada… I hope there’s a positive twist.”
Deutsch responded: “I hope so too.”
F45’s press release offered scant details on where it had all gone wrong in the last 12 months, but noted that “market dynamics” made it difficult for prospective franchisees to get loans for the roughly $250,000 it costs to set up a gym.
The company believes that reducing its corporate workforce by 45 percent will see a return to positive cash flow. But it’s a far cry from the bells and whistles that rang the public listing on the New York Stock Exchange last year and is a fast-growing startup that Deutsch says was faster than franchises like McDonald’s and Subway in Australia.
F45 was founded in 2013 and quickly grew in popularity for offering what it calls 45-minute functional workouts.
The company’s move to the New York Stock Exchange made headlines in July of last year, making Gilchrist $500 million overnight.
The company’s investor, Hollywood star Mark Wahlberg, also enjoyed a similar windfall at the time, but reportedly sold 1.1 million of his shares in March and April for $12.2 million ($17.45). million Australian dollars), according to the AFR.
“You want to be there with the energy of the people who work with you, by your side, inspiring you, pushing you and supporting you,” Wahlberg told CNBC ahead of the company’s US market debut.
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