The company’s founder left last month, but a talented replacement has just been hired.
Fitness franchise company shares Exponential Fitness (XPOF 34.25%) The stock price soared on Monday after the company announced its new CEO. A new CEO usually doesn’t move a stock price this much, but this was a special circumstance and investors reacted well to the company’s choice. As of 3:00 PM ET on Monday, Exponential Fitness shares were up 36%.
Are they the right person for the job?
Exponential Fitness is under investigation by the Securities and Exchange Commission for allegedly misleading franchisees about the financial health of its fitness brands and for allegedly making threatening statements by its founder and former CEO, Anthony Geisler. Geisler was indefinitely suspended in May and resigned a week later, leaving the CEO position vacant.
Exponential Fitness today announced that it has appointed Mark King as its new CEO. King is the former Taco Bell ( Delicious! Brand) from 2019 until his retirement on January 1. With more than 8,500 Taco Bell restaurants worldwide, 94% of which are franchised, King is certainly well-suited to lead a franchise business like Exponential Fitness.
King’s experience is why investors are celebrating the hire today.
What next?
It’s important to keep in mind that the SEC investigation is ongoing, so uncertainty remains over Xponential Fitness’ stock price, despite Geisler’s departure and the addition of a talented hire like King.
Xponential Fitness franchises 10 different fitness brand concepts, including stretching and yoga. Because of this, the financial health of each franchisee is more important to Xponential Fitness than the numbers. If franchisees aren’t making enough profit, they won’t be motivated to operate existing locations or open new ones.
According to Xponential Fitness’s publicly available information, its franchisees appear to be doing well: Membership and facility traffic are both increasing, and the company reports that franchisees have a payback period of 2.5 years, which isn’t bad.
That being said, this is part of what the SEC is investigating, so there’s no shame in investors deciding to wait until there’s more clarity on what’s going on with Xponential Fitness. For now, I agree with investors that the hiring of Mark King as CEO was a good move, so things may turn around for the company.
Jon Quast does not hold any positions in any stocks mentioned. The Motley Fool does not hold any positions in any stocks mentioned. The Motley Fool has a disclosure policy.
/cdn.vox-cdn.com/uploads/chorus_asset/file/25697397/STK071_APPLE_N.jpg?w=150&resize=150,150&ssl=1 "Apple is reportedly working on developing “LLM Siri” to compete with ChatGPT")
