The Federal Trade Commission (FTC) has obtained a landmark $17 million settlement against Xponential Fitness, a franchisor operating popular fitness brands including Club Pilates, Pure Barre, YogaSix, StretchLab and BFT. This enforcement action underscores the critical importance of compliance with franchise disclosure requirements and serves as a cautionary tale for both franchisors and prospective franchisees.

Background and Allegations

The FTC alleged that Xponential Fitness engaged in a pattern of misrepresentation and concealment regarding mandatory pre-sale disclosures. Under the FTC franchise rule, franchisors are required to provide prospective franchisees with a franchise disclosure document at least 14 days before accepting any funds or executing binding agreements. These disclosure requirements exist to ensure that franchise candidates can make informed investment decisions before committing substantial capital to a franchise business.

According to the complaint, Xponential's violations fell into four principal categories.

• Material Misrepresentations Regarding Opening Timelines

Xponential allegedly misrepresented the time required to open franchise studios, claiming that franchisees could open their locations within six months of signing the franchise agreement. In reality, franchisees typically required more than a year to open their studios—if they opened at all. This misrepresentation is particularly egregious given that Xponential was required to track opening timelines and relied on revenue generated by new franchisees, demonstrating that any such misstatement was not inadvertent. As a result of these false representations, franchisees incurred substantial unanticipated costs, including interest on borrowed capital and rent payments on unopened studio locations.

• Concealment of Executive Background and Material Legal Actions

The FTC franchise rule mandates disclosure of important information regarding franchisor executives and material legal proceedings.

Xponential allegedly failed to disclose that a former CEO had been involved in the sale or operation of other franchises and had faced multiple fraud lawsuits arising from those activities. Additionally, Xponential failed to disclose a former president of franchise development's bankruptcy history, as required by the franchise rule.

• Deficient Reporting of Former Franchisee Information

The franchise rule requires franchisors to provide prospective franchisees with names and contact information for franchisees who left the system during the prior year, enabling candidates to conduct independent due diligence. Xponential allegedly omitted the names of franchisees whose studios had ceased operations, been terminated, canceled or not renewed. Where names were disclosed, the FTC alleged that Xponential provided outdated contact information, effectively preventing prospective franchisees from obtaining meaningful information about studio turnover rates and the experiences of former franchise owners.

• Failure to Provide Timely and Accurate Disclosure Documents

Perhaps most fundamentally, Xponential allegedly failed to provide timely FDDs to prospective franchisees at least 14 days before execution of franchise agreements, in direct violation of the FTC rule. This failure deprived franchisees of the opportunity to meaningfully review critical information about Xponential's offerings and associated risks before paying initial franchise fees averaging $45,000 per studio and entering into 10-year franchise agreements.

Terms of the Settlement

The proposed consent order, subject to finalization by the U.S. District Court for the Central District of California, provides significant relief. The order imposes a $17 million monetary judgment, which will be used to provide redress to affected franchisees. Additionally, Xponential is prohibited from making misrepresentations to prospective franchisees in the promotion, sale, or offering of any franchise, including the specific misrepresentations and deceptive omissions alleged in the complaint. Finally, the order requires Xponential to comply with the Franchise Rule going forward, including the provision of complete, accurate, and timely franchise disclosure documents.

Practical Implications

This enforcement action has been welcomed by the franchise community as an important step toward eliminating sharp practices in franchise sales and promoting fair administration of franchise relationships. It bears emphasis that Xponential represents an outlier rather than the norm. The vast majority of franchisors comply with disclosure requirements and administer their franchise relationships in good faith.

Nevertheless, this case illustrates both the value and limitations of professional review. Many of the losses suffered by Xponential franchisees could have been avoided through careful professional review of the FDD prior to purchase. However, certain losses could not have been detected due to Xponential's fraudulent nondisclosures—information that cannot be evaluated if it is never provided unless the lawyers providing the advice engaged in their own due diligence beyond the FDD disclosures. Indeed, the FTC was alerted to these disclosure violations by private franchise attorneys who discovered the deficiencies during their review of Xponential's FDD and conduct.

Like any significant business venture, prospective franchisees benefit from professional guidance before making investment decisions. Attorneys can play a valuable role by advising clients to seek qualified professionals who can help them make informed decisions when evaluating franchise opportunities.

Reprinted with permission from March 24, 2026 issue of The Legal Intelligencer© 2026 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.