🚨 A Fitness Franchise Fights to Get Fit

Welcome to the Franzy Five — your 5-minute fix on what’s moving in the franchise world.

Franchising continues to prove it’s one of the most dynamic corners of business ownership. Some brands are navigating real pressure — from Xponential Fitness fighting for stability to Kilwins closing a legacy store — while others are leaning into growth, offering big incentives or attracting investors from new industries. What ties it all together is the opportunity for smart operators to learn from both the wins and the missteps.

Also in this edition:

 🥪 Firehouse Subs offers six-figure incentives to fuel growth
🍔 BK’s focus on refranchising
🏠 Real estate investors are turning to franchising for stronger margins

Let’s get into it!

🔥 Franzy Insights: Xponential Fitness Is Fighting to Get Fit

Xponential Fitness built its name by rolling up boutique brands like Club Pilates and CycleBar. But over the last two years, the model began cracking. Federal investigations, restated financials, and CEO turnover have put the company’s stability in question.

Here’s the deal:

• Federal investigations by the SEC, DOJ, and several law firms over securities fraud, accounting misstatements, and misleading franchise claimshave weighed on the company. While the company was recently cleared by the SEC, these issues have been a distraction for the company

• Franchisees are hurting. Reports from earlier this year showed 80% of brands lose money monthly, over 100 locations are for sale at steep losses, and closures are piling up despite claims of “never closing” studios.

• Leadership in flux with three CEOs in three years. Now CEO Mike Nuzzo is in charge. Given his successful background at Eyemart Express and PetCo, things may be turning around.

🔍 Our Take:
Just last week, we noted how Xponential Fitness sold of two brands, CycleBar and Rumble, to Extraordinary Brands. That move was part strategy, part survival move. Given restated earnings, ongoing lawsuits, and a stock down nearly 60% from IPO, the picture is clear: this is a system under severe strain.

We’ve written about what happens if a franchisor goes out of business. The old Xponential shows what happens when growth comes first and fundamentals come second. Thankfully, the new CEO, Mike Nuzzo, has a good track record. Nonetheless, it will take him time to steady the ship. At Franzy, we will continue to monitor the situation and help guide potential franchisees in choosing the best franchisors.

🥪 Firehouse Subs Joins the Incentive Race

Summary:

• Firehouse Subs will pay franchisees up to $100,000 per new store opened in 2026, expanding an earlier incentive program.

• Incentives are spreading across chains like Potbelly, Marco’s, Qdoba, Wendy’s, and Papa John’s, with royalty breaks, fee cuts, and upfront cash.

• These programs signal tougher economics and slower growth, as brands look to keep pace with competitors like Jersey Mike’s, which grew units 12% last year versus Firehouse’s 3%.

Our take:
Franchise incentives are a double-edged sword. On one hand, they can lower barriers for new operators and give existing franchisees a cash boost. On the other hand, they’re often a sign that organic growth has stalled and the underlying economics aren’t strong enough to sell themselves. For buyers, the message is clear: don’t let a six-figure bonus cloud your diligence. Incentives can sweeten the deal, but if profitability isn’t there, you’re just cashing a short-term check while taking on a long-term problem.

Link to Restaurant Business Online →

🍔 Burger King Bets on Remodels and Refranchising

Summary:

• Burger King’s U.S. sales rose 1.5% last quarter, helped by expanded late-night hours at 1,200+ restaurants, store remodels, and a barbell pricing strategy.

• Burger King’s parent company bought out its largest U.S. franchisee, Carrols Restaurant Group, in 2024. They have remodeled many of those 1,000+ locations, and saw a 2.9% sales lift at upgraded stores.

• Now, those restaurants are being sold back to new local operators, part of a refranchising push to get units into the hands of focused franchisees after several large operators went bankrupt.

Our Take:
This is a playbook we’re seeing more often: franchisors step in, stabilize weak operators, invest in remodels, then hand units back to franchisees. For Burger King, it’s working. But it’s also a reminder of how fragile the system can be when big franchisees get overextended. The future of Burger King will depend less on flashy programs and more on whether new owners can balance debt, remodel costs, and execution at the unit level.

Link to Restaurant Dive →

🏠 From Bricks to Brands: Why Real Estate Investors Are Buying Franchises

Summary:

• Real estate investors are pivoting to franchising to diversify income, escape tenant headaches, and tap into proven systems.

• Semi-absentee models let owners spend 10–15 hours a week on oversight while managers handle daily operations.

• Many franchises deliver higher margins (15–30% EBITDA) and recurring revenue versus real estate returns, but success depends on picking strong categories like home services, health, or senior care.

Our Take:
This trend underscores franchising’s growing credibility as an asset class. Real estate investors, who are used to running the numbers, are recognizing that the right franchise can deliver stronger margins and a clearer growth path than another rental property. But the “semi-passive” narrative can be misleading—franchises still require smart oversight, especially early on. At Franzy, we’ve seen the best outcomes when investors treat franchising like a serious portfolio play, not a hobby. Done right, it’s a shift from tenant drama to scalable teams and recurring revenue.

Link to Forbes →

✂️ Snippets

🍑 Peach Cobbler Factory Launches Mobile Units (Restaurant News)

🥤 Main Post Backs Smoothie King Growth (Franchise Times)

🍽️ How Franchisees Handle Underperforming Stores (Franchising.com)

🐔 Is Birdcall the Next Big Chicken Chain? (Franchise Times)