The Federal Trade Commission has reached a major settlement with Xponential Fitness, resolving allegations that the fitness franchisor violated federal franchisee disclosure rules and engaged in deceptive business practices. The settlement includes $17 million in financial aid that will be distributed to affected franchisees, marking the largest consumer settlement in a franchise-related lawsuit.
According to a statement from the agency, Xponential Fitness, which operates and sells franchises for brands such as Club Pilates, Pure Barre, Yoga Six, StretchLab, and BFT, failed to provide accurate and complete information to potential franchise owners. The FTC claims that these omissions and misrepresentations left many investors without a clear understanding of the financial risks and operating realities associated with their investments.
According to a statement by the FTC, the company misrepresented how long it usually takes to open a franchise location. While Xponential indicated that studios can be operational within six months of signing a contract, the agency claims that many franchisees are waiting more than a year to open their businesses, if they open at all. The discrepancy has reportedly led to unexpected costs and financial stress for franchise owners who have already paid significant licensing fees.
We are happy to be your best source for news.
Please add us to your favorite sources list so that our news, information and interviews appear in your feed. Thank you!
The FTC also alleges that Xponential failed to disclose important background information about key executives. According to a statement, the company has not disclosed to potential franchisees about legal matters involving former CEO Anthony Geisler, including multiple fraud cases that should have been disclosed under federal regulations. Additionally, the company did not disclose the report involving a former senior executive, as required.
Other concerns raised in the complaint include improper reporting of franchise closures. In a statement, Xponential either lost or provided outdated contact information for franchisees that the studio had discontinued over the past year. This prevents potential buyers from properly evaluating exchange rates and negotiating with previous franchise operators.
The agency also found that Xponential failed to provide timely Franchise Disclosure Documents (FDDs), which must be submitted at least 14 days before any contract is signed. According to a statement, this failure limited franchisees’ ability to fully review key financial and operational details before committing to agreements that often include initial fees averaging $45,000 and long-term contractual obligations.
Christopher Mufarij, director of the FTC’s Bureau of Consumer Protection, emphasized the widespread impact of such actions. He said many Americans put significant personal savings into franchise opportunities in hopes of building a successful business, and that failure to provide the necessary disclosures undermines their ability to make informed decisions.
As part of the settlement, Xponential Fitness is required to pay $17 million in consumer settlements and is prohibited from making misleading claims or omitting key information in future franchise proposals. The Company must fully comply with the Franchise Act, including providing accurate, complete, and timely disclosure documents to prospective franchisees.
Source: FTC Gov
#FTC #reaches #17M #settlement #Xponential #Fitness #franchise #violations #PYMNTS.com