The multi-brand franchisor is also suing its former CEO amid a widening federal investigation into the company.
Mark King is the new chief executive of Xponential Fitness. The company announced its appointment of the former Taco Bell CEO June 17, just over a month after the suspension and subsequent resignation of Anthony Geisler.
King, 64, takes over for Brenda Morris, who served as interim CEO following Geisler’s exit. Morris remains on Xponential’s board of directors.
In a statement, King said he is “excited” to work with the Xponential team. “We have a strong portfolio of brands that are category leaders and as one of the leading franchisors in the health and wellness space, we are ideally positioned to continue to profitably grow our global footprint. I look forward to getting to know the Xponential team and franchisees over the coming months and driving value for our employees, franchisees and shareholders.”
Based in Irvine, California, Xponential’s portfolio of fitness franchises includes Club Pilates, CycleBar and StretchLab; it has more than 3,100 global locations. In February it offloaded Stride Fitness to Shaun Grove, who wants to revamp the brand, and last month sold Row House to Extraordinary Brands.
Mark King, who stepped down as CEO of Taco Bell at the end of 2023, is the new leader of Xponential Fitness.
A spokesperson for Xponential said the company is in a quiet period leading up to the close of its second quarter, with King unavailable for additional comment. King will participate in the company’s second quarter conference call and will “articulate his high-level strategy on future calls,” the spokesperson said.
Taco Bell’s CEO from 2019 to 2023, King led the Mexican quick-service restaurant brand during a time when it added more than 1,400 new franchise locations and saw positive same-store sales growth in all but one quarter. He’s on the board of Party City and is also chairman of the BIG3, the 3-on-3 basketball league founded by rapper Ice Cube and entertainment executive Jeff Kwatinetz.
King will receive an annual base salary of $800,000, is eligible to participate in the company’s annual cash bonus program and will receive restricted stock units with an initial value of $3.5 million, according to the company’s 8-K filed June 17 with the U.S. Securities and Exchange Commission.
King joins Xponential amid an expanded federal investigation into the company that now includes the United States Attorney’s Office for the Central District of California. Xponential said it received notice May 7 of a probe and grand jury subpoena by the U.S. Attorney’s Office in connection with the FBI’s criminal investigation. In December it disclosed an investigation by the SEC, and the company is facing multiple class action lawsuits alleging it defrauded its investors by making “materially false and misleading statements and omissions regarding Xponential’s business, financial results and prospects.”
Xponential has said it will continue cooperating with the SEC and intends to cooperate with the USAO. Its board of directors also formed a Special Committee of Directors consisting of independent directors Chelsea Grayson, Jair Clarke and Jeffrey Lawrence, “to investigate these matters.”
Geisler, who formed Xponential in 2017 and took the company public in 2021, was suspended May 10 and resigned May 13. His term on the board of directors expired May 30.
Shares of Xponential, which trades under the ticker symbol XPOF, jumped more than 30 percent yesterday and closed at $15.15. That’s up from $8.48 on May 10, but below its 52-week high of $26.85 from June 2023.
Xponential sues ex-CEO
A dispute between Geisler and his former company is brewing after Geisler demanded access to Xponential’s books, records and documents.
In a letter sent to Xponential’s counsel May 21, Geisler, via his attorney John Hueston, demanded access to a variety of documents, including those produced to the SEC and the Department of Justice “in response to the subpoenas served on Xponential on or about December 5, 2023 and May 7, 2024, as well as copies of those respective subpoenas.” Geisler is also seeking documents related to any internal investigations pertaining to the June 2023 short-seller report from Fuzzy Panda Research, which called the fitness company an “abusive franchisor” and warned Xponential is a “house of cards” about to collapse.
Should Xponential not honor Geisler’s rights of inspection under California law, wrote Hueston, “we will take action to enforce such rights and will seek all appropriate remedies against Xponential.”
Xponential in response sued Geisler in Delaware Chancery Court May 24, asking the court to find that Delaware’s laws, not California’s, govern the former CEO’s rights to inspect the company’s books and records.
“Xponential is organized and exists under the laws of the State of Delaware. The company’s charter includes an explicit choice of forum clause, which mandates that actions asserting claims governed by the internal affairs doctrine be brought in the Delaware Court of Chancery,” the company said in its complaint.
Under Section 220 of the Delaware General Corporation Law, which Xponential says would apply in this case, a shareholder must demonstrate “proper purpose” for access to a company’s records, such as to investigate possible corporate wrongdoing or mismanagement. The California Corporations Code, meanwhile, grants any shareholder the right to inspect a company’s records “… upon the written demand on the corporation … at any reasonable time during usual business hours, for a purpose reasonably related to the holder’s interests as a shareholder.”
Neither Xponential nor Hueston immediately responded to requests for comment on the lawsuit. Franchise Times will update this story if a response is received.