Orangetheory is closing studios. The Navy Yard location in Washington DC shuts on October 31 after ten years, and the franchisee said plainly that it could not get the traction to make the studio financially viable. Six more US studios have gone this year, in Berkeley, Emeryville, Rockford, Shreveport, Appleton and Harker Heights.
The brand still lists 1,500 studios worldwide on its own site. The US number tells a different story, and the reason sits in the franchise paperwork rather than anything happening on the treadmill.
The royalty is charged on revenue
An Orangetheory franchisee pays a royalty of 8% of gross sales (every dollar through the door, before a single cost comes out). Not profit. Revenue.
On top of that sits a brand fund contribution. Sources disagree on the figure, reporting it anywhere from 2% to 3% of revenue with a ceiling of 5%, depending on which year's disclosure document they drew from. Call the combined number roughly a tenth of the top line. That tenth leaves before rent, before payroll, before equipment, before the front desk is staffed.
Now put that next to the payroll data. We covered the HFA benchmarking numbers on October 11: profitable gyms spend 32.4% of revenue on payroll, and everyone else spends 42.5%. A studio running at that higher payroll figure and paying a tenth to its franchisor has committed more than half its revenue before the landlord is paid.
The arithmetic gets harder at the bottom of the range. A bottom-quartile Orangetheory turns over about $513,000 a year. A tenth of that is roughly $51,000 going to the brand in a year the studio itself may lose money.
Why does a franchisor keep growing while its studios close?
Because the two things are not connected. A royalty on gross sales pays the franchisor whether or not the location is profitable, so brand revenue can hold steady while individual owners go under. Franchisee counsel quoted by Inc. points at the same three things: rents fixed on ten-year leases, costs that keep climbing, and royalties charged on the top line. The risk sits with the owner. The revenue sits with the brand.
The direction of travel
| Period | What happened to US studios |
|---|---|
| End of 2023 | About 1,333 |
| Through 2025 | 1,298 down to 1,224. Thirteen openings against 87 closures |
| Aug 2025 to May 2026 | 26 closures, 17 of them in the final 60 days |
| June 2026 | About 1,198 |
Thirteen openings and 87 closures in a single year is the line to sit with. That is a brand shrinking while it still sells franchises at a $59,950 franchise fee and a total initial investment that runs from roughly $765,000 to $1.4 million depending on the filing.
One caveat worth stating plainly. These outlet counts come from franchise-disclosure filings compiled by franchise research sites rather than from a single document we can hold up, and one of those sites is inconsistent about which year's filing it drew on. Treat the direction as solid and the decimal places as approximate.
What came before this
The pressure is not new. Orangetheory's largest franchisee, Honors Holdings, ran 143 studios before it wound down in late 2024 following an involuntary bankruptcy petition from two former studio sellers. A lender formed a new entity, Camarillo Fitness Holdings, took on more than 100 of those studios, and then closed more of them. Purpose Brands, which sits over the Orangetheory franchisor, replaced the brand president and the chief financial officer on September 21 of this year.
None of that is a verdict on the workout. Orangetheory built a category and the class still sells. The question is who absorbs the cost when a location does not work.
What this means for you
If you are weighing a franchise, read Item 6 of the current disclosure document before you read the marketing. Ask what the royalty is charged on, and model your worst year rather than your best one. A fee on revenue behaves very differently from a fee on profit when a quarter goes badly, and the ten-year lease will not flex to meet you.
If you run independent, this is the argument for staying that way. You keep the tenth. We saw the same caution in the Xplor survey data: 68% of operators had just opened a location and only 37% planned to open another. Operators are reading their own numbers and slowing down. The constraint is sites, staff and acquisition cost, not demand.
And if you are a franchisee inside a system like this, the lever you control is revenue per studio, not cost. Xponential's Q2 showed the same shape: more studios, less revenue per studio. A royalty on the top line means every dollar of extra revenue is worth ninety cents to you. Every dollar you cut is worth a full dollar. Cutting is the faster lever, right up to the point where it takes the member experience with it.
Read the royalty line. It tells you who the business is built to pay.