It’s the week for selling gym franchises. To CrossFit’s changing of the guard, add the purchase by a blank-check company of F45 Training backed in part by actor-musician Mark Wahlberg. The deal with Crescent Acquisition will give F45 cash and a public listing. The enterprise value of $845 million is a bargain next to Peloton Interactive and Planet Fitness, for example. But there are some big assumptions.
F45 – the “F” is for “functional” and “45” for the minutes in each workout – was founded in 2013. It combines two new gym fads, boutique workout spaces and crafted exercise and online workouts promising “sweat-dripping, heart-pumping fun.” Last year the company had $93 million in revenue from memberships and equipment, almost four times as much as two years earlier. By revenue, that makes it roughly one-seventh the size of basic health club outfit Planet Fitness and about a tenth as big as virtual exercise craze Peloton.
Growth assumptions for F45 are somewhere in between the two. That makes F45’s valuation looks fairly conservative. Based on Peloton’s enterprise value-to-estimated 2021 sales ratio of almost 6 times, F45 could be worth more than $1 billion. Putting the company’s projected adjusted EBITDA on Planet Fitness’ still higher forward multiple pumps that up another 50% or so.
That implies Crescent got a good deal for F45. But it also assumes gym companies are fairly valued overall, which may not be the case. Sure, more than 70 million Americans used health clubs in 2018, up roughly 2.6% from the previous year, according to the International Health, Racquet & Sportsclub Association. But new gyms opened up at about the same rate. Simplistically, that suggests for every American, at least, who joins F45, one dumps Planet Fitness – and vice versa.
Meanwhile, Covid-19 has cramped aspiring warriors’ ability to hit the weights or spin classes, except perhaps for Peloton’s virtual sessions. Getting its existing nearly 2,000 franchises open and running again and more of them sold, opened and profitable is another big challenge for F45. Even after people emerge from lockdown, there are only so many gym rats to go around.