StretchLab: a Very Profitable Franchise (3 Years Payback)

If you want to get into the fitness franchise industry, you might have considered stretching studios: they offer a low entry price point and can be very profitable businesses. StretchLab is definitely one franchise you should seriously consider.

Indeed, whilst you would invest on average $230,000 to set it up, your new StretchLab franchised studio would generate on average $529,000 in revenue per year.

All in all, we found StretchLab has an excellent 3 years payback, meaning you would recoup your investment within 3 years. That’s really impressive.

Do you want to know how much it really costs to open a StretchLab franchise and how much profits you can realistically make with this business? Let’s find out!

Key stats

Franchise fee	$60,000
Royalty fee	8.00%
Marketing fee	2.00%
Investment (mid-point)	$248,000
Revenue	$629,000 per year
Revenue per square foot	[franchise_value_revenue_per_sq_ft]
Sales to investment ratio	-
Payback period	[franchise_value_investment_payback]
Minimum net worth	$350,000
Minimum liquid capital	$100,000

What is StretchLab?

StretchLab is an American chain of fitness clubs owned by Xponential Fitness, based in Irvine, California, along with other fitness chains such as Club Pilates, Row House, CycleBar and Pure Barre.

StretchLab was established in 2015 in Los Angeles, California, by Jeff Flores and RJ Wamsley.

Its studios offer one-on-one and group-assisted stretching sessions.

StretchLab started franchising in 2017. As of today, it has over 208 licensed locations globally, with 203 in the US.

StretchLab franchises pros and cons

The Pros:

• Expert and extensive support: The franchisor provides its franchisees with corporate support, experience, advice and growth strategies to establish and run a successful franchise. Franchisees get top-level management guidance, access to a network of successful partners, weekly and monthly update webinars, field operations, one-on-one support and periodic performance reviews.
• Simple business model: The StretchLab business model involves simple solutions for all members as it does not require complex equipment therefore  franchisees can get started quickly and improve their bottom lines.
• Quality training: StretchLab offers its franchisees an extensive training curriculum to equip them with the basics of running a successful StretchLab fitness center. Their initial training consists of 23 classroom hours and covers its systems, equipment use, launching the studios and ongoing sales.
• Site selection and construction: StretchLab helps its franchisees with site selection, club layout manuals, designs, construction, and lease negotiations to minimize development costs. In addition, it also provides them with approved equipment vendors and equipment selection.
• Smart investment: A StretchLab franchise presents franchisees with an opportunity for low-cost entry, recurring revenue channels and strong EBITDA margins since they can market to everyone. Additionally, franchisees can leverage a growing need for customized stretching sessions to scale and grow their businesses.
• Personalized plan for each member: The brand uses a personalized approach customized to fit the individual needs of each member. This makes its franchises stand out from the competition and appeal to a large population. 
• Marketing and advertising: StretchLab has an effective marketing strategy to help franchisees with their public relations. Franchisees can leverage the brand’s growing image, personalized local studio advertising, social media and targeted promotional campaigns to take their service to a wider market.
• Financial assistance: The brand helps its franchisees with loan processing through SBA and preferred third-party lenders. Franchisees get funding for their startup and development costs.
• Exclusive territory granted: The franchisor grants the franchisees the right to operate its studios in a protected development market. It does not license any other franchisees or operate competing channels in the agreed-upon territory.

The cons:

• Not a passive investment: A StretchLab franchise does not allow for absentee ownership. The franchisees need to be actively involved in the day-to-day operations of their clubs.
• Not a part-time business: The franchise can’t be run on a part-time basis. Franchisees are expected to adhere to the parent company’s set working hours.
• Not a home-based business: The franchise cannot be run from home or mobile units. Franchisees need to establish fixed office space or retail facilities.

How much does a StretchLab franchise cost?

The investment covers all the start-up costs you may need to open a Stretch Lab franchised studio. You must pay the franchisor an initial franchise fee of $60,000. In addition to this franchise fee, the investment also covers:

• Formulation costs: Net leasehold improvements, signage, opening retail inventory kits, etc.
• Equipment: Fitness equipment and other FFE packages; computers and software.
• Operating costs: Travel and living expenses, real estate/lease, insurance, training program fees, technology fees, additional funds for 3 months, etc.

You would have to invest, on average, $248,000 to open a new Stretch Lab fitness franchise studio, which is typically 1,200–1,500 sq. ft. in size. Note that this is the investment required to open a “traditional franchised studio.” Indeed, the vast majority of fitness studios are traditional franchises.

To clarify, there are two main kinds of fitness studio formats from which you can choose: traditional franchised studios and Non-traditional franchised studios.

Here’s the full breakdown of costs per studio format:

StretchLab startup costs (traditional studio)

Type of expenditure	Low	High
Initial Franchise Fee	$60,000	$60,000
Formation Costs	$44,800	$153,000
Equipment	$7,000	$17,500
Initial Marketing expense	$15,000	$15,000
Operating Costs	$35,775	$88,375
Total	$162,575	$333,875

StretchLab startup costs (non-traditional studio)

Type of Expenditure	Low	High
Initial Franchise Fee	$0	$60,000
Formation Costs	$53,000	$65,000
Equipment	$6,700	$17,800
Initial Marketing expense	$15,000	$15,000
Operating Costs	$25,075	$45,375
Total	$99,775	$203,175

What is the turnover of a StretchLab gym?

On average, a Stretch Lab franchise makes $629,000 in sales per year or $466 in revenue per square foot.

This is the average sales per traditional franchised studio for approximately 148 of the 283 franchised studios that operated for all of 2022.

How profitable is a StretchLab franchise?

We estimate the average StretchLab franchised studio makes $183,000 in profits per year.

This corresponds to a 29% EBITDA margin, in line with the average fitness club as per our analysis.

Yet, note that apart from royalty, marketing fees and rental costs, StretchLab does not provide a detailed profit and loss for its franchised studio. Instead, we had to estimate EBITDA by using industry averages from our own fitness franchise benchmark.

For example, we assume staff costs to be higher for StretchLab vs. the industry average (35% vs. 28%), in line with other personal training franchises (e.g. The Camp Transformation Center, The Exercise Coach, etc.) due to the nature of the business (1-1 stretching).

Profit and loss	Amount	% revenue	Notes
Revenue	$628,866	100%
Staff	$(220,103)	35%	assumption*
Rent	$(68,250)	11%	as per FDD
Royalty fee	$(62,887)	10%	as per FDD
Marketing	$(31,443)	5%	industry average
Other operating costs	$(62,887)	10%	assumption
EBITDA	$183,296	29%

Should you invest in a StretchLab franchise?

StretchLab is one of the best franchise investment opportunity we found. Indeed StretchLab has one of the best payback in the fitness franchise industry (3 years).

This makes a lot of sense: you would invest on average $230,000 to set up a new StretchLab franchised gym and this would generate twice as much in revenue ($529,000 per year): a solid sales-to-investment ratio.

Note that we obtained this payback by comparing the investment of $230,000 to the net profits which we estimate at 15% of revenue.

Disclaimer

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