Xponential Fitness (XPOF) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01Franchisees may not successfully execute our suggested best practices, which could harm our business
2. 02We, franchisees, master franchisees or our third-party service providers may fail to properly maintain the confidentiality and integrity of our customer personal data
3. 06Our financial results are affected by the operating and financial results of, and our relationships with, our franchisees and master franchisees
4. 07If we fail to successfully implement our growth strategy, which includes opening new studios by existing and new franchisees in existing and new markets, our ability to increase our revenue and results of operations could be adversely affected
5. 08The number of new studios that actually open in the future may differ materially from the number of studio licenses sold to potential, existing and new franchisees
6. 09If we are unable to anticipate and satisfy consumer preferences and shifting views of health, fitness, weight loss, and wellness, our business may be adversely affected
7. 10Our success depends substantially on our ability to maintain the value and reputation of our brands
8. 11Our business and operations could be negatively impacted by the recent changes in executive leadership
9. 12Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel
10. 13Our expansion into international markets exposes us to a number of risks that may have a material adverse impact on our financial condition and results of operations
11. 14We have incurred operating losses in the past, may incur operating losses in the future and may not achieve or maintain profitability in the future
12. 15Macroeconomic conditions or an economic downturn or uncertainty in our key markets could adversely affect discretionary spending and reduce demand for our and franchisees’ services and products, which could adversely affect our and franchisees’ ability to increase sales at existing studios or to open new studios
13. 16Disruptions in the availability of financing for current or prospective franchisees could adversely affect our business, results of operations, cash flows and financial condition
14. 17Franchisees may incur rising costs related to the construction of new studios and maintenance of existing studios, which could adversely affect the attractiveness of our franchise model
15. 18If franchisees are unable to identify and secure suitable sites for new studios, our ability to open new studios and increase our revenue could be materially adversely affected
16. 19Opening new studios in close proximity to existing studios may negatively impact existing studios’ revenue and profitability
17. 20We, franchisees and master franchisees rely heavily on information systems provided by a single provider, and any material failure, interruption, weakness or termination with such supplier may prevent us from effectively operating our business and damage our reputation
18. 21Franchisees outside of North America also rely on information systems provided by third parties, and any disruption in such information systems could negatively impact such franchisees' operations, including sales at franchised studios
19. 22Franchisees have and could in the future take actions that harm our business
20. 23Our franchise model subjects us to a number of risks, any one of which may impact our royalty and other revenues collected from franchisees, harm the goodwill associated with our brands, and materially and adversely impact our business, results of operations, cash flows and financial condition
21. 24We may not be able to fully realize the cost savings and benefits initially anticipated from the restructuring plan or the expected charges may be greater than expected, any of which could negatively impact our business
22. 25We operate in a highly competitive market and we may be unable to compete successfully against existing and future competitors
23. 26Other health and wellness ecosystems, including holistic wellness and recovery-focused businesses
24. 27Franchisees may be unable to attract and retain customers, which would materially and adversely affect our business, results of operations, cash flows and financial condition
25. 28New brands or services that we launch in the future may not be as successful as we anticipate, which could have a material adverse effect on our business, results of operations, cash flows and financial condition and we may not be able to successfully integrate acquired brands
26. 29Our growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business
27. 30Our business is subject to various laws and regulations and changes in such laws and regulations, our or franchisees’ failure to comply with existing or future laws and regulations, could adversely affect our business, results of operations, cash flows and financial condition
28. 31We currently are, and may in the future be, subject to legal proceedings, regulatory disputes and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, results of operations, cash flows and financial condition
29. 32We are and have in the past been the subject of government investigations which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation
30. 33We, franchisees and master franchisees could be subject to claims related to health and safety risks to customers that arise while at our and franchisees’ studios
31. 34Failure by us, franchisees, master franchisees or third-party service providers to comply with existing or future data privacy laws and regulations could have a material adverse effect on our business
32. 35Changes in legislation or requirements related to electronic funds transfer, or our or franchisees’ failure to comply with existing or future regulations, may adversely impact our business, results of operations, cash flows and financial condition
33. 36We and franchisees are subject to a number of risks related to ACH, credit card, debit card and gift card payments we accept
34. 37Our dependence on a limited number of suppliers for certain equipment, services and products could result in disruptions to our business and could adversely affect our revenue and results of operation
35. 38Changes in trade policies, including tariffs, could adversely affect our business
36. 39Our intellectual property rights, including trademarks and trade names, may be infringed, misappropriated or challenged by others
37. 40Our quarterly results of operations and other operating metrics may fluctuate from quarter to quarter, which makes these results and metrics difficult to predict
38. 41Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our results of operations
39. 42Past increases in same store sales may not be an indication of our future results of operations because such metric may fluctuate significantly
40. 43Use of social media may adversely impact our reputation or subject us to fines or other penalties
41. 44We may require additional capital to support business growth and objectives, and this capital might not be available to us on attractive terms, if at all, and may result in stockholder dilution
42. 45We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations
43. 46Our reliance on a single third-party supplier for most retail products exposes us to operational and financial risks
44. 47Goodwill and indefinite-lived intangible assets are a material component of our balance sheet and impairments of these assets could have a significant impact on our results
45. 48We have incurred substantial indebtedness which could adversely affect our financial condition and limit our ability to pursue our growth strategy
46. 49Our failure to satisfy the covenants in our credit agreement may result in events of default
47. 50Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities
48. 51We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control
49. 52Failure to obtain and maintain required licenses and permits or to comply with health and fitness regulations could lead to delays in opening studios, interruptions in services or the closure of studios, thereby harming our business
50. 53Sustainability issues may have an adverse effect on our business, financial condition and results of operations and damage our reputation

Risks Related to Our Organizational Structure

1. 03We will be required to pay the TRA parties for certain tax benefits we may receive, and the amounts we may pay could be significant
2. 54We are a holding company and our principal asset is our 72.0% ownership interest in XPO Holdings, and we are accordingly dependent upon distributions from XPO Holdings to pay dividends, if any, and taxes, make payments under the TRA and pay other expenses
3. 55In certain circumstances, XPO Holdings will be required to make distributions to us and the other holders of LLC Units, and the distributions that XPO Holdings will be required to make may be substantial
4. 56Continuing Pre-IPO LLC Members hold a significant voting power and their interests in our business may be different than yours
5. 57The change of control provisions in the TRA may result in situations where the Pre-IPO LLC Members have interests that differ from or are in addition to those of our other stockholders

Risks Related to Our Class A Common Stock

1. 04Our major stockholders may pursue corporate opportunities that could present conflicts with our and our other stockholders’ interests
2. 05Failure to maintain effective internal control over financial reporting may have an adverse effect on our financial condition and stock price
3. 58Some provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock
4. 59Directors, officers, stockholders and affiliates of Snapdragon Capital Partners may pursue corporate opportunities independent of us that could present conflicts with our and our other stockholders’ interests
5. 60The reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors
6. 61Our reliance on these exemptions may result in investors finding our Class A common stock less attractive. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our Class A common stock price may be more volatile
7. 62When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs
8. 63We have identified a material weakness in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations
9. 64We have in the past and may in the future be subject to short selling strategies that may drive down the market price of our Class A common stock
10. 65The trading price of our Class A common stock has been and may continue to be volatile, and the value of your investment could decline

General Risks

1. 66We may face exposure to foreign currency exchange rate fluctuations
2. 67Failure to comply with anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences
3. 68Our employees, contractors, franchisees and agents may take actions in violation of our policies or applicable law. Any such violation could have an adverse effect on our reputation, business, results of operations and prospects
4. 69Our and franchisees’ businesses are subject to the risk of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism
5. 70Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our business, results of operations, cash flows and financial condition
6. 71Activist investors could cause us to incur substantial costs, divert management’s attention, and have an adverse effect on our business