“It was never in his dreams,” F45 co-founder Rob Deutsch says he could have imagined the sudden fall of the fitness empire he started in 2013.
The Australian gym behind what actor Mark Wahlberg calls “the best workout on the planet” has taken a hit on its global ambitions this week after revealing that it laid off 110 of its staff.
It came when Adam Gilchrist, who shares the same name as the Australian cricketer and founded the company along with Deutsch, suddenly announced that he was stepping down as CEO and chairman of the company.
F45 announced that it is scaling back its expansion plans “amid changing macroeconomic and business conditions”.
After planning to roll out 1,500 new franchises this year, the F45 will instead target between 350 and 450 and its projected revenue has fallen from $275 million to $130 million.
The announcement had a disastrous effect on the company’s stock, which plunged more than 60 percent on Wednesday (US time) to 79 cents.
It improved to $1.59 on Thursday afternoon but was still miles away from when it first floated on the New York Stock Exchange (NYSE) in July last year at $16.10 a share.
Deutsch, who resigned as the company’s CEO and sold his shares in 2020, was stunned by the developments.
“Never could have imagined this in my wildest dreams,” he wrote on Instagram. “When I got out, and sold off the F45, I left a healthy, cool commercial beast. All the way from the company culture to the heartbeat of the business…the trainings. The F45 was special.
“I really hope that all 110 laid-off employees will find happiness and opportunity elsewhere.”
Deutsche’s post received dozens of comments from F45 franchisees and loyal gym attendees that offered some insight into what contributed to the company’s collapse.
The former Sydney banker declared there were “enormous problems that need fixing” when asked if the F45 could turn back and appeared to agree with the Hawaii F45 coach who suggested the decision to go public with the company was a mistake.
The F45 franchise account in Canada also appears to claim that there were decisions made by the company during the Covid shutdowns that were “overwhelming”.
“We hope you’re still involved,” commented F45 Training Doon. “The decisions they made during the damaging shutdowns have been overwhelming for franchises. It’s amazing what the past couple of years have been like, especially if they opened during the pandemic. Just absolute hell in Canada… I hope there is a positive turn.”
Deutsch replied, “I hope so, too.”
The F45 press release offered few details about where everything had gone wrong in the past 12 months, but did note that “market dynamics” are making it difficult for potential franchisees to get loans for the nearly $250,000 cost to set up. Gym.
The company believes that a 45 percent workforce reduction will see a return to positive cash flow. But that’s a far cry from the bells and whistles that rang out to the public at the New York Stock Exchange last year, rapid early growth that Deutsch said was faster than franchises like McDonald’s and Subway in Australia.
The F45 was founded in 2013 and has grown rapidly in popularity for offering what it calls a 45-minute functional workout.
The company’s move to the New York Stock Exchange made headlines in July last year, making Gilchrist $500 million overnight.
Hollywood star investor Mark Wahlberg also saw similar windfalls at the time, but sold 1.1 million of his shares in March and April for US$12.2 million (A$17.45 million), according to AFR.
“You want to be there with the energy of the people who work with you, by your side, inspiring, pushing and supporting you,” Wahlberg told CNBC before the company debuted on the US market.