An Orange County company that sells franchises for popular boutique fitness studios has reached an agreement with the Federal Trade Commission to settle allegations of rule and practice violations, and will pay back $17 million to franchisees, it was announced Wednesday.
In a complaint filed in Los Angeles federal court, the FTC alleges that Irvine-based Xponential Fitness — which sells franchises for such brands as Club Pilates, Pure Barre, YogaSix, StretchLab, and BFT — misrepresented key information about the costs, risks, time to open and operate studios, and essential details about the company’s operations, leaving many current and prospective franchisees in the dark about their investment.
“Americans invest their life savings into franchises with high hopes of launching a financially prosperous business,” Christopher Mufarrige, director of the FTC’s consumer protection bureau, said in a statement.
“Xponential’s failure to provide prospective franchisees with legally mandated information denied American workers and potential employers the ability to evaluate the costs and risks involved,” the statement continues. “The Trump-Vance FTC will continue to bring actions to stop deceptive practices that harm American workers.”
Before it goes into effect, the settlement must be approved by a federal judge.
A message seeking comment from Xponential Fitness was not immediately answered.
The monetary judgment of $17 million is the largest amount ever to go back to consumers in an FTC franchise case, the federal agency said.
The judgment also prohibits Xponential from making misrepresentations to prospective franchisees in the promotion, sale or offering for sale of any franchise, including the alleged misrepresentations and deceptive omissions referenced in the complaint.
The agreement also requires Xponential to comply with the Franchise Rule, including by providing complete, accurate and timely franchise disclosure documents to prospective franchisees.