March 18, 2026|Franchise Frontlines
March 18, 2026 | U.S. District Court for the Central District of California | Stipulated Order Entered
Executive Summary
In a stipulated order entered by the court, the Federal Trade Commission (“FTC”) resolved its enforcement action against Xponential Fitness, Inc. and affiliated franchisor entities concerning alleged violations of the FTC Act and the Franchise Rule. The FTC alleged that the defendants misrepresented and omitted material information in connection with the marketing and sale of boutique fitness franchises, including disclosures related to opening timelines, litigation history, and Franchise Disclosure Documents (“FDDs”). The defendants agreed to resolve the matter through injunctive relief and a $17 million monetary judgment for franchisee redress. The defendants neither admitted nor denied the allegations, except as necessary to establish jurisdiction.
Relevant Background
According to the FTC’s complaint, the defendants operate a portfolio of boutique fitness franchise brands and have sold thousands of franchise licenses throughout the United States. The FTC alleged that prospective franchisees relied on the defendants’ disclosures and representations in evaluating these opportunities, often making significant financial commitments in the process.
The complaint asserted that, over a multi-year period, the defendants engaged in practices that did not comply with the FTC’s Franchise Rule, which requires franchisors to provide accurate, complete, and timely disclosures to prospective franchisees prior to the sale of a franchise.
Among other allegations, the FTC contended that the defendants represented that franchise studios typically opened within approximately six months, while available data reflected longer timelines in many instances. The FTC also alleged that certain information regarding executive involvement, litigation history, bankruptcy disclosures, and former franchisee contact information was not fully or accurately disclosed in FDDs provided to prospective franchisees.
The FTC further alleged that, in some instances, FDDs were not provided within the required 14-day period prior to execution of franchise agreements, limiting the ability of prospective franchisees to conduct meaningful due diligence before entering into long-term contractual commitments.
Separately, public disclosures by the company reflect that additional disputes with current and former franchisees were resolved through private settlements totaling approximately $22.75 million. Those matters were not part of the FTC’s enforcement action.
Settlement Terms
The court entered a stipulated order resolving the FTC’s claims. As part of that resolution, the defendants neither admitted nor denied the allegations set forth in the complaint, except as necessary to establish the court’s jurisdiction.
The order imposes a monetary judgment of $17 million, designated for consumer redress to franchisees. The payment is structured in installments over a defined period.
The order also includes injunctive provisions governing future franchise sales practices. These provisions prohibit misrepresentations regarding material aspects of franchise offerings, including information relating to management, litigation, bankruptcy history, opening timelines, and franchisee turnover.
In addition, the defendants are required to comply with the Franchise Rule on a going-forward basis, including obligations to provide complete, accurate, and timely FDDs to prospective franchisees. The order also imposes compliance reporting, recordkeeping, and monitoring requirements designed to support ongoing adherence to these obligations.
The order further includes standard provisions regarding consumer redress administration and cooperation with the FTC, as well as enforcement mechanisms typical of FTC settlements.
Looking Forward
This settlement reflects continued regulatory focus on franchise sales practices, particularly with respect to presale disclosures and the accuracy of information provided to prospective franchisees. The FTC’s allegations and the scope of the relief provide several practical considerations for franchisors.
First, the matter highlights the importance of ensuring alignment between internal operational data and external disclosures. Statements regarding timelines, costs, and operational expectations should be supported by current system performance and periodically reviewed for accuracy.
Second, the settlement underscores the need for careful attention to core FDD disclosures, including Items 2, 3, 4, and 20. Information relating to management, litigation history, bankruptcy disclosures, and franchisee turnover continues to be an area of regulatory scrutiny given its role in prospective franchisee decision-making.
Third, compliance with timing requirements remains critical. The Franchise Rule’s 14-day disclosure requirement is procedural but material, and franchisors may benefit from implementing systems that consistently track and document compliance.
Fourth, the case highlights the importance of maintaining accurate franchisee records, including contact information and system turnover data. These disclosures play a meaningful role in allowing prospective franchisees to conduct independent diligence.
Finally, from a broader franchise perspective, the settlement illustrates how regulatory enforcement may focus not only on affirmative representations but also on omissions and inconsistencies within disclosure documents. As franchise systems continue to evolve, maintaining alignment between operational realities and disclosure practices remains an important component of risk management.
This article is based solely on the allegations in the FTC’s complaint and the terms of the stipulated order entered by the Court. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the FTC’s filings and the Court’s order in this matter.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
