I think it asks if you want to turn it on during the set up flow, but I don't remember. I know it's off on mine, I suppose if you want to use Find My they have to have your location, since that's it's purpose.
Apple's Find My page seems to indicate it's end to end encrypted in many purposes, but lists all the ways it has to reveal your location to Apple to provide the feature.
End-to-end encryption doesn't do much good when Apple (and by extension, the NSA) is on the other end. It's the same deal as Google, with different set dressing.